Prime Minister of India - Dr. Manmohan Singh

PM's address at the Inauguration of India Economic Summit

"It gives me great pleasure to participate in this highly prestigious event being hosted jointly by the World Economic Forum and Confederation of Indian Industries. I compliment both these organizations for making the Indian Economic Summit a regular exciting annual feature of our landscape.

 

This Summit is in some ways special. It is the 25th anniversary of the first Indian Economic Summit in 1985 which was inaugurated by the then Prime Minister of India Rajiv Gandhi. Rajivji on that occasion outlined the vision of India as a rapidly growing dynamic and modern economy, breaking free of the shackles of persistent poverty, hunger and disease. I am happy to say that we have delivered substantially on that promise. But the task is by no means unfinished.

 

India's growth rate has accelerated from 5.6 percent in the 80's to an average of nearly 9 percent in the 5-year period preceding the global financial crisis. We are today a more open economy, open to both trade and investment and integrating successfully with the world at large. We have also seen substantial progress in reduction of persistent hunger, poverty and disease, though, as I said a moment ago, this is an area where much more needs to be done. Our strategy today is not just to deliver rapid growth, but to deliver rapid and inclusive growth, a growth that will provide productive employment to our young population and raise living standards in rural areas across the length and breadth of our vast country.

 

The integration of the Indian economy with the rest of the world has undoubtedly created new opportunities. But it has also brought before us new challenges. These were amply demonstrated by the global financial crisis which exploded last year. That crisis has disrupted economies everywhere in the world. It has been a stressful period around the world and fortunately the major economies have responded in a reasonably coordinated manner. We have avoided a collapse on the scale of the Great Depression of the 1930s. Clearly, The worst is behind us though the path to global recovery will be long and presently somewhat uncertain.

 

I am happy to say that India has been able to face the global economic downturn better than most other countries in the world. The Indian economy grew at a respectable rate of 6.7 percent in 2008-09. In the current financial year, we also faced the adverse impact of an inadequate monsoon and the resultant slow down in our agricultural economy. Nevertheless growth is expected to be around 6.5 percent. There are clearly signs of an upturn in the economy. With a normal monsoon next year, we hope to achieve a growth rate of over 7%.

 

This performance in highly adverse circumstances indicates the resilience of our economy. It also vindicates to a large extent, the corrective action taken by our government to manage the downturn- like other countries we resorted to a significant stimulus and we will take appropriate action next year to wind this down. Our medium term objective continues to achieve a growth rate of 9 per cent per annum. Taking into account the fact that our domestic savings rate is now as high as 35 per cent of our GDP, this is eminently a feasible target.

 

Off course, a return to high growth requires work in many directions. World demand will pick up but probably only slowly. Our strategy therefore must aim at sustaining a high rate of growth on the strength of strong domestic demand. We seek to achieve this through a large increase in investment in infrastructure.

 

The development of high quality infrastructure is an essential requirement to fulfil India's ability and capability of rapid growth. We have an ambitious programme of investment in all the key infrastructure sectors: Power, roads, ports, airports, telecommunications, irrigation and urban infrastructure. Some of this investment will be through the public sector. However private investment has a large and growing role to play in achieving our target. In many areas we are following a strategy of private-public partnership.

 

To fulfil our commitment of achieving inclusive growth, we will also have to expand government expenditure in critical key social sectors, especially health and education, including skill upgradation of workforce on a massive scale.

 

Environmental sustainability is also an important objective and one that has gained significance in the context of climate change. We have prepared a National Action Plan on climate change outlining our response in this critical area focusing on increased energy efficiency and greater use of clean energy technology including solar energy. Special attention will have to be paid to prevent degradation of our scarce land and water resources.

 

As foreign investors you are welcome to participate in all our efforts. Our Foreign Direct Investment policy has been greatly liberalized. FDI has been freely allowed in more and more areas under the automatic route and now covers a number of sectors in Agro-processing, nearly all areas of Industry and also Services.

 

I am happy to say that as a result of these measures, the accumulation of FDI inflow amounts to over US $120 billion since 2001-02. This is not a large enough number given the scale of our economy. In recent years India has been listed as among the most attractive locations for FDI. In addition to FDI we welcome portfolio investment in equity in Indian companies by qualified institutional investors.

 

Our policy will be guided by the desire to make India even more attractive for Foreign Direct Investment. We are particularly keen to rationalize and simplify procedures so as to create an investor friendly environment.

 

In pursuance of our commitment to develop greater people-ownership of public undertakings, our Cabinet has recently decided on the criteria on which such companies will qualify for disinvestment. We now hope to see faster progress in sale of a portion of Government shareholding in the domestic market and issue of fresh equities in respect of the selected companies in the public sector.

 

Though the global financial crisis did not affect Indian banks or our financial market directly, it drew attention to the need to strengthen our financial system in various ways. We need to ensure that the financial system can provide the finance needed for our development, and especially for infrastructure development. This opens up a broad agenda for reform.

 

We need to develop long-term debt markets and to deepen corporate bond markets. This in turn calls for a strong insurance and pension sub-sectors. Some of the reforms needed, especially in insurance, involve legislative changes. We have taken initiatives in this area and will strive to build the political consensus needed for these legislative actions to be completed. We need to improve futures markets for better price discovery and regulation. We also need to remove institutional hurdles to facilitate better intermediation.

 

All these issues will be addressed through gradual but steady progress in financial sector reforms to make the sector more competitive while ensuring an efficient regulatory and oversight system.

 

India looks to the future with confidence and with hope. We are confident of meeting the domestic and international challenges to fast and inclusive growth. We are also better placed than any time in the recent past to push the reform process forward. I believe we have a bright future if we make use of our well known strengths and the opportunities that lie ahead. In the coming months and years, I hope to see a decisive change in the pace of our progress to becoming a leading economy in the world.

 

With these words, let me end by wishing this summit all the very best. I am sure that you will have vigorous and intense discussions on a range of contemporary issues relating to the functioning of Indian economy and how hour system reform process can be accelerated. I also hope that, like always, your deliberations will bring into sharper focus the direction that India's economic policy should take. I look forward to your deliberation with great expectation and I thank you."