Prime Minister of India - Dr. Manmohan Singh

PM's speech at the Silver Jubilee of CESS at Hyderabad

I am delighted to be here today at the Silver Jubilee of the Centre for Economic and Social Studies. I was happy to learn from Shri Vithal that he took the initiative to set up this Centre inspired by the example of my friend, K N Raj. I compliment Shri Vithal, Professor C H Hanumantha Rao, Professor R Radhakrishna and all those associated with CESS for the good work they have done during these 25 years.

Both Professor D R Gadgil and Professor K N Raj, economists for whom I have had the highest regard, did a great service to our country by setting up institutions of excellence and research in economics away from metropolitan centers and in cities like Pune and Trivandrum. Eminent economists like Professor V K R V Rao, Professor Malcolm Adiseshiah and others set up similar research centers in other states. I must pay tribute to the ICSSR, especially the Late Professor J P Naik, for the vision and foresight shown in funding these institutions.

The regional dispersal of economic research institutions during the 1970s did play an important role in shifting the focus of economic research and policy away from the macro-models of the 1950s and 1960s to more regional and micro studies. This has played an important role in shaping public policy at the State and district levels. I sincerely urge institutions like CESS to become more actively engaged in the vital policy debates of today at the State and regional level.

Some of the most difficult and complex policy choices today have to be made by our political leadership at the State level. Be it in fiscal policy, in pricing of utilities, in labour policy or in social policies, State Chief Ministers and district level political leaders are today being asked to take important and complex decisions. The choices they make should be better informed and based on detailed research by institutions like yours.

In a democracy public opinion is, of course, the final arbiter. However, social scientists have a professional obligation, a social responsibility, to shape public opinion. They must intervene in public policy debates, especially at the local and community level, and guide both policy makers and the general public, so that informed choices are made. We live in a knowledge based world and policy choices must be based on knowledge.

I was heartened to learn that CESS has had a fruitful relationship with the State Government. I am sure the dynamic and forward-looking Chief Minister of your state, Shri Rajasekhara Reddyji will continue to benefit from the guidance of institutions like yours. Andhra Pradesh is one of our more dynamic States and is setting the agenda for the entire country in many fields. The meeting of the Board of the Asian Development Bank in this city this year will give you a unique opportunity to interact with people from some of the most dynamic countries in Asia. I am sure you will make the best use of this opportunity.

Ladies and Gentlemen,

It is not often recognized that one of the positive aspects of our development process has been the regional dispersal of economic growth and development across our vast sub-continent. While it is true that large parts of north-central and eastern India remain relatively backward, perpetuating an imbalance first observed as early as the first quarter of the last century, it cannot be denied that many hitherto backward regions have witnessed accelerated development in the past quarter century. The more developed States are showing the way forward to the less developed ones. This healthy competition between States can augur well for more balanced regional development, provided there is a process of learning, imitation and catching up. If not, we may face the prospect of an accentuation of regional inequalities. This is not in the interests of the Nation.

The subject of inter-regional variations in development has engaged economists in India for a long time. It did receive a boost, however, with the growth of research institutions such as yours across the country. I hope your research findings are widely disseminated, especially in those regions still lagging behind so that they can learn from the experience of the more developed ones.

I believe you are marking your Silver Jubilee with a Conference on the international experience in equitable development. Permit me to say that there is much within the inter-regional experience of our own country from which important lessons can be drawn in this context. Indeed, even within regions there are marked differences in development experience from which we can draw lessons.

Here in Andhra Pradesh, the contrasting experience of the coastal and inland districts, that is Coastal Andhra and Telangana, should be a subject of more detailed research so that we can address the problem of the backwardness of some districts by learning from the experience of the more developed ones. Is the answer to Telangana's perceived backwardness to be found in political or administrative solutions, or in encouraging new investment in human development and infrastructure? Will Telangana benefit from more public investment alone, or does it also need agrarian initiatives that empower peasants, and, investment in education, health and the social and economic empowerment of women, tribals and minorities?

Several factors combine to influence inter-regional variations in growth and development. The extent of agrarian transformation, pace of urbanization, the quality of infrastructure, level of human resources development, and the quality of overall governance are all important determinants of regional variations in development. Since a large proportion of our population is still dependent on agriculture, differences in the rates of growth of agricultural output and productivity are bound to be an important factor contributing to regional disparities in the level of development and standard of living.

A study of these aspects of development can contribute a great deal to our understanding of regional inequalities. What factors are inhibiting development in the more backward areas of our country? Will political decentralization and administrative unbundling help or hinder the development of less developed regions? What are the relative roles of the State and of Markets in enabling development? I urge our research institutions to address such vital issues of the day so that the political leadership in the country is better informed, so that our public debates are better informed, so that the choices we make, and the demands we make are better informed.

While purely subjective and emotional issues do rise to the surface in any public campaign, researchers and analysts can play a vital role by enabling more informed, more reasoned and more mature discussion.

Your conference intends to focus not just on growth and development but, more specifically, on questions of equity. Here too there are very different experiences across the country and we have not drawn the correct lessons from these development experiences. For example, in terms of social development and equity it is suggested that Kerala has many lessons to offer other States. Indeed, Kerala has done remarkably well in terms of social and human development indicators. However, it is a moot point whether Kerala could have sustained its development model without the access that its skilled and educated working class secured to employment in the Gulf region.

Is Kerala, then, an example of successful social development, or of the successful globalisation of its skilled work force? If the employment opportunities available in the Gulf region had not been on offer, could Kerala have sustained its model of development? Would there have been social crisis arising out of skilled unemployment? What then are the lessons of the Kerala model of development? Is it that we must focus on investment in human development alone, or that we must also simultaneously ensure access to jobs, be it at home or abroad. The latter would require pursuing policies that encourage investment and encourage the mobility of labour and capital.

Another question that has puzzled me is why have we not been able to pursue labour-intensive development in the past two decades, as China did. What lessons can we learn from the Chinese experience in employment generation? How far has employment growth in China been helped by policies to promote exports of labour-intensive manufactures? Our Government is committed to creating employment opportunities and to a minimum guarantee of employment in rural areas. However, the real challenge before us is to create productive employment opportunities. How has China managed to pursue a more labour-intensive strategy of development than ours?

What are the impediments to employment generation in our model of development? Are our policies wrong? What changes should we make? I do hope your Conference can throw some light on this because the best intervention we can make to promote equitable development is in fact to increase the demand for skilled and unskilled labour.

Ladies and Gentlemen,

I believe that in promoting more equitable development the Government has two important responsibilities. First, we must pursue sound macro-economic policies and encourage new investment. Public confidence in Government policy - the confidence of investors, of savers, of consumers - has a long-term favourable impact on the sustainability of growth. An improvement in the quality of governance can create a virtuous cycle of rising investment, rising employment, rising incomes and rising growth.

Second, the Government must provide social safety nets and social insurance to protect workers, farmers, self-employed and professionals from the downside of a downturn. The assurance of social security can have a socially and politically stabilizing impact and contribute to equitable development. However, no government can sustain a social safety net unless the economy grows at a reasonable pace and generates the required revenues. Hence, fiscal sustainability of growth is an important pre-requisite for a more equitable growth process. Bankrupt governments cannot promote equity, leave alone growth.

I believe one of our positive legacies is the record of prudent fiscal management. I recall that in 1990-91, when we were on the verge of a default, it was our sterling reputation in fiscal management that helped us earn support in various capitals of the world and in the board rooms of multilateral financial institutions. While we do still have unacceptably high fiscal deficits, and we must bring the level down, our record of fiscal management, and the transparency of our budget process as well as the health of our financial system have served us well.

We cannot, however, afford to rest on our laurels. We must continue to strive hard to retain this reputation for sound fiscal management. I do sincerely believe that it is only on the basis of much higher growth, of incomes and revenues, that we can sustain higher expenditures.

Ladies and Gentlemen,

I don't have to tell you that money does not grow on trees. We can not spend our way to prosperity. Development is not a dinner party. Hard choices have to be made. I hope professional economists like you can guide us in Government as to how we can make those choices taking into account the requirements of efficiency and equity in our growth process.

State Governments have a particularly important role to play in this regard. I have decided that during the course of this year I will interact more with Chief Ministers so that I can work with them in pursuing sound economic policies. I am beginning this process here today in Hyderabad. A large part of the economic agenda has to be pursued at the State level by State Governments. In vital areas such as infrastructure, especially power and roads, agriculture and in education and health, there is much we can do at the State level that will have beneficial consequences for the country as a whole.

I have already said that learning from the success of the VAT process, we must create an Empowered Committee of Chief Ministers on Power Sector Reforms. We should seek an all-Party consensus on power sector reforms. We need a similar consensus on policies relating to labour so that we can generate more employment in the organized sector of the economy. Institutions like yours can play an important role in generating the required political consensus.

Ladies and Gentlemen,

I thank CESS for inviting me to inaugurate this Silver Jubilee Conference. I look forward to learning about your deliberations. I wish CESS another 25 years of purposeful and fruitful research.

Thank you.