SPEECHES / STATEMENTS 

PM Inaugurates 80th annual general meeting of FICCI

February 15, 2008, New Delhi

“I am delighted to be once again with you at the Annual General Meeting of FICCI. Your Annual Meeting is taking place at an interesting and challenging time. On the one hand, our economy is ticking along smoothly, having registered a growth rate of 9.6% last year and likely to touch almost 9% this year as well. On the other hand, there are clouds on the horizon with a distinct possibilities of the global economy, particularly the developed world, facing a downturn in the coming year. To some extent, a major part of our growth story is driven by domestic factors, particularly improved investment and consumption demand. At the same time, we must be aware that we cannot be completely insulated from chilly global winds that may blow in our direction. I hope your AGM will reflect on the shape of things to come and show us how we can continue to maintain the dynamism of our growth process at home, in spite of such external concerns. Government and business must be active partners in devising such a strategy and a road map.

I must, at the very outset, compliment Indian business and enterprise for showing enormous resilience in an increasingly integrated and competitive global economy. There is a new sense of confidence in the air and I do salute captains of industry who have earned a name for themselves and for their enterprises and for their countries by their commitment. When I come to gatherings like these I am no longer confronted by petitions, prayers or protests. Rather, I hear more about performance, potential and possibilities. This is a good way to begin. I am aware that there are many persisting problems. Your President has referred to some of these. It would not be proper for me join wishing with him. We are in the midst of the Budget season and I am sure that the relevant Ministers of the Government will take note of what has been stated by your President. It has been and it will be our effort in Government to redress issues brought to our attention to the maximum extent possible within the political parameters which have to be respected.

We begin the year with renewed confidence in the sustainability of our rapid growth process. The savings rate has almost touched 35% of GDP and the investment rate is at an all time peak of over 36% of GDP. Capital formation, both in the public and private sector, is touching new peaks and pushing the frontiers of growth possibilities to new levels. Inward Foreign Direct Investment has crossed US$ 20 billion last year, a level unimaginable a few years ago.

I have often said that investment, in the final analysis, is an act of faith. It is a vote of confidence. On this count, therefore, I feel reassured that investors and industry are delivering an overwhelming vote of confidence in favour of Indian economy. There will be of course, ups and downs, there will be leads and lags, there will be sectoral and regional imbalances. These should be, and must be addressed. But let us not miss the wood for the trees. There is an underlying dynamism in our economy and it is translating into more employment, into higher revenues for Government, into higher levels of social expenditure, into higher incomes and, most importantly, into lower poverty and better standards of living for our people at large. It will be our endeavour to continue to maintain an environment conducive to enterprise and creativity, so that we do not choke off essential growth processes which alone can lead to creation of more wealth, which I believe are so essential for meeting our social and economic goals.

It is interesting that the early 1990s also saw similar optimism. But that dynamism was not sustained. After three years of above 7% annual growth between 1992 and 1997, the economy slowed down considerably. In the Ninth Plan, between 1997-98 to 2002, the growth rate declined to 5.5%. The Governments of the day were unable to inspire. They were preoccupied with divisive agendas and their economic agenda was not sufficiently focused. There was no attempt to make our growth more broad-based and inclusive. This was not to be repeated.

Today when I look back at the last four years, I do derive satisfaction from the fact that we have succeeded simultaneously on two fronts. On the one hand, we have been able to accelerate economic growth substantially, taking it to a higher plane. At the same time, we have been able to put in place the basic architecture necessary for ensuring that this growth will be broad based, more even, more socially inclusive and therefore, more sustainable in the medium term. We have launched a set of major programmes which invest in improving our human resources capabilities, in reducing urban-rural disparities and in bridging inter-regional disparities. In fact, these programmes, I believe, will enhance the impact of our policies on the economic front. It is, I believe, a win-win relationship between growth and empowerment.

To help step up growth and at the same time make growth more inclusive, I would like to emphasise four key aspects of our policy framework, namely, agriculture and rural development; infrastructure; education; and health care.

Although the share of agriculture in our GDP has been declining, we cannot minimize the importance of this sector, both for our economy and for our polity. It continues to support a significant proportion of our population and acts as a social safety net. Therefore, the health of agriculture is vital for sustaining our economic performance. Recognising this, we had a special meeting of the National Development Council on agriculture and announced two major agricultural programmes costing Rs 35,000 crores in the XI Plan – the Rashtriya Krishi Vikas Yojana and the Food Security Mission. We are also looking at ways of having a quantum jump in investment in irrigation. The allocation for agriculture and irrigation has been tripled in the XI Plan as compared to the X Plan. We have also increased the minimum support price for wheat and rice substantially. All this demonstrates our commitment to reversing the unfortunate trend we saw between the mid-1990s and the mid-2000s of a decline in investment in agriculture and a shift of the terms of trade away from agriculture. I hope that all this, coupled with other initiatives in animal husbandry, horticulture and fisheries, will help agriculture grow at a healthy rate of 4% in coming years. We are also looking into the credit needs of farmers. We cannot have a situation where 80% of our agricultural sector is outside the formal financial system and suffers from excessive burden of indebtedness. We are trying to resolve this problem and I hope it will be done soon.

Rural infrastructure too is being improved through increased public investment in rural connectivity, including rural roads, rural telecommunication and rural electrification under Bharat Nirman programme. The NREGA has pumped significant additional purchasing power in to the hands of rural households. The reform of cooperative credit societies and our policies for financial inclusion should also help bridge the urban-rural divide to an extent. I hope to see the economy of rural India catching up with urban India in the next decade, partly through greater agricultural productivity and partly through more rapid industrialization itself.

The second important step we took was to prioritize investment in infrastructure. The Committee on Infrastructure in the Planning Commission has certainly boosted the investment in infrastructure. It has also successfully catalysed greater private participation in infrastructure. This is necessary if we are to meet the XI Plan goal of raising the annual investment in infrastructure from 5% of our GDP in the X Plan to 9% of GDP in XI Plan, a quantum jump.

I read a lot being said and written about the poor state of our infrastructure. In fact, facts tell a slightly different story. The civil aviation sector is going through an unprecedented boom. We are going to see two brand new international airports going into operation in Hyderabad and Bangalore in a few weeks. Delhi and Mumbai too are seeing a transformation of their airport infrastructure. Wherever I travel, I see new airport terminals under construction. I think that civil aviation is on the right track.

As for railways, this sector has seen a revolutionary transformation in the last four years. Their performance has improved on all fronts - revenues, operating ratios, cash surpluses and safety. In fact, the turnaround of Indian Railways demonstrates what good leadership can do even in a large government organization. The railways have set up new mechanisms for attracting private investment in railways. Many private firms are already running container trains. Soon, we will have private investment in logistics parks, railway stations and in coach production. These initiatives, along with the two Dedicated Freight Corridors, will prepare our railways for meeting the demands of future decades.

The National Highway Programme has been greatly expanded over the past four years. The most important change is that we have moved away from the old fashioned construction contract driven approach of the early years to a genuine Public Private Partnership approach. We now have a robust framework of Model Concession Agreements for BOT road contracts and a viability gap funding system in place. The planned investment of over Rs 2,20,000 crores in roads over the next five years will be a major boost to our infrastructure – and of course, to our automobile sector of the economy as a whole.

The Power sector is seeing a major expansion and private participation in power generation has revived, particularly after the Ultra Mega Power Projects were launched last year. As distribution reforms and open access take root, we will see the necessary improvements in the power sector as well. Captive coal mining has also expanded considerably after the policy changes we brought into place. Overall, I see an increasing partnership between the public and private sectors in ensuring energy security for the country and this augurs well for our future.

Urban areas are getting unprecedented renewed attention with 63 cities getting a boost in urban infrastructure through the Jawaharlal Nehru Urban Renewal Mission. This Mission has been immensely popular and successful and visible results are already there for all to see.

As I travel around India, I find construction activity having gone up palpably. I regard infrastructure development as the cornerstone among our pillars of development. I appreciate the fact that in many areas there are still bottlenecks and supply is constantly lagging behind demand. This challenge must be met but one must also not forget that sometime, such imbalances can in fact have a positive effect since they reward the early investors and encourage new investment.

Education and healthcare are the two other areas which we have given primacy to. There is no modern industrial economy in the world that does not have at least 80% literacy. We are still below 70%. We have therefore made education a priority area for public policy. I am happy that the share of the expenditure on education in the Central Gross Budgetary Support is going to go up from less than 8% in the 10th Plan to over 19% in the 11th Plan. As the most favoured sector, education is now seeing a three-fold increase in its share and a five-fold increase in actual outlays. Apart from increasing public investment in elementary and secondary school education, we are setting up 30 new Central Universities, 370 new colleges in educationally backward districts, 6000 top class schools in each development block, 8 new Indian Institutes of Technology, 20 new Indian Institutes of Information Technology, 7 new Indian Institutes of Management, and 5 new Indian Institutes of Scientific Education and Research. This, I believe, is the most ambitious expansion in educational opportunities in our country since Independence. We will soon be introducing a Bill providing the Right to Education to every child. This is the surest way of ensuring rapid inclusive growth in the long run. Your President referred to the key shortages and I do agree with you that these will be priority area for all of us to be concerned about it. The Government will unfold very shortly a massive mission design to upgrade the quantity and quality of skill formation in our country. The National Vocational Mission its details are now being worked.

The National Rural Health Mission, with its emphasis on decentralized planning, better resource availability in PHCs and improved service standards is quietly changing the health care scenario in rural areas. However, I remain concerned about affordability of health care and quality of public health provisioning in our country. We need reform of our health care system, especially our public hospitals. Private health care cannot address all the health needs of our people. Hence, we are looking at new models of affordable health insurance and other related strategies. These are areas in which State Governments must do more. The Government of India is willing to provide funds, but we need good governance at the delivery stage.

All these initiatives should have a positive impact on the growth process and make it more inclusive. An important policy stance we have adopted to ensure that growth is more inclusive has been to keep inflation under check. I know that some of you are not happy about our emphasis on inflation control. There have been some impatient editorials about the sacrifice of growth at the altar of inflation control. But in a country where 90% of our people live in the unorganized sector, no indexation of their income, inflation can be a very painful experience giving rise to widespread social discontent and therefore, I think no Government in our country can be oblivious to the objective of ensuring reasonable price stability without hurting the growth process.

I am confident that this year too we will be able to sustain 9% growth and hold the price line at acceptable levels. There are global concerns about a slow down. We need to be aware of these concerns and we will take steps to limit their impact on us. The Finance and Commerce Ministers are seized of the matter. I do not see any reason why we cannot sustain 9% per cent growth even in the face of a global slowdown. The domestic economy has the potential to sustain such growth. The challenge before us is to ensure that we tap into this potential and make it work for us. We will take all possible steps to help our industry. The competitiveness of our exports remains our priority concern and whatever is necessary to enhance competitiveness and efficiency of our export sector that will find a ready listening point in our Government.

I hope you appreciate the significance of what we are trying to do in Government to sustain high growth and make growth inclusive. Government and business can achieve a lot by working together. Patriotism is not the monopoly of the political class. In fact, the captains of Indian industry from the days of our freedom struggle have toiled and worked hard to give our economy a facelift. They have therefore contributed immensely to building what Indian is today. I sincerely believe that Government and business can achieve a lot by working together to create both income and employment, wealth and welfare, prosperity and progress. Our captains of industry have played a vital role in nation building. I salute you and wish you all success.”