September 10, 2001

    The Prime Minister, Shri Atal Bihari Vajpayee chaired a meeting of Prime Minister’s Economic Advisory Council here today. Apart from the members of the Council and Senior Government officials, Union Finance Minister, Shri Yashwant Sinha, Commerce & Industry Minister, Shri Murasoli Maran, Dy. Chairman, Planning Commission, K..C.Pant, Minister for Law, Justice and Company Affairs, Shri Arun Jaitley, Minister for Power, Shri Suresh Prabhu and Minister for Disinvestment and Department for development of North-East Region, Shri Arun Shourie and Minister for Agriculture, Shri Ajit Singh were also present on the occasion.

    Following is the text of the Prime Minister’s Opening Remarks at the meeting:

    "I am pleased to be with you at this meeting of the Economic Advisory Council.

    This Council was constituted to give the best possible independent economic advice to the Government. Today we need that advice more than ever because of the economic slowdown that India is going through.

    You all know the figures that show lower GDP growth rates, falling industrial production, declining exports, slumping bank credit, and worsening fiscal position of the Centre and the States.

    At the same time, the slowdown needs to be seen in a proper perspective, with a confident recognition of the inherent strengths of our economy. This is essential to avoid unnecessary pessimism and panic. Ours is still one of the five fastest growing economies in the world, at the time of a global economic slowdown.

    Inflation is low and stable. Our foreign exchange reserves continue to rise—now they are at another record of US $ 45.3 billion. The RBI has softened interest rates. In spite of the difficulties in the US and other western economies, our IT companies continue to grow at an impressive rate. The hard work of our farmers has created a huge surplus of foodgrains. Indeed, the problem on this front is that of effective off-take and distribution to those who need food most.

    These strong indicators of macro-economic health, however, cannot hide the deeper systemic maladies in the Indian economy. Nor should they cause complacency over the grave nature of the current economic slowdown.

    The National Development Council has recently approved the target of 8 percent annual average growth in GDP during the Tenth Plan. A still higher growth is envisaged in the Eleventh Plan. These high targets do call for a steep climb, especially when we today find ourselves standing at the trough of a 5 percent growth rate.

    But climb this tall and difficult mountain, we must. For without faster and more balanced economic growth, there is simply no solution to the long-pending problems of poverty, unemployment, and regional and social imbalances. Nor can we fulfill the inexorably rising expectations of our growing population.

    It is worth reminding ourselves that even our ability to ensure India's national security will be weakened, if we do not strengthen the backbone, muscles, and sinews of our economy.

    Obviously, we need the right economic strategy to tackle both the immediate and long-term problems. I am sure I will get sound advice and guidance from this Council on both counts.

    I compliment you for making many useful recommendations in the document "Economic Reforms: A Medium-Term Perspective", which you submitted early this year. That was before the Union Budget. You are aware of the developments in the national and international economic spheres since then. The Government, too, has taken several decisions during this intervening period.

    At today’s meeting, my colleagues and I seek your ideas on both our short-term agenda and our long-term mission.

    Some of the specific issues on which I would like to have your suggestions are:

• What might be the trends in the world economy over the coming months and next few years? Specifically, how long could the global slowdown last; how will it affect us; and how can we mitigate its adverse impacts?
• Is our present interest rate and exchange rate management strategy appropriate for stimulating economic revival?
• How can we mobilize non-budgetary resources from our banking sector to step up productive public spending on infrastructure, without creating heavy fiscal burdens for the future?
• How can we improve the efficiency of our financial sector and restore investor confidence?
• What are the practical measures that we can take to achieve better fiscal management by the Centre and the State Governments, consistent with the ground realities?
• How best can we step up the tax to GDP ratios for both the Centre and the States to meet our commitments for increased public investment?
• How can we address the issues of stable and remunerative prices to farmers, excessive foodgrain stocks, food security for the poor, and rationalization of the PDS in an integrated framework?

    In addition, I would also like to have your views on the likely scenarios in global trade negotiations, at and beyond the Doha inter-ministerial conference of the WTO. What might be significant opportunities for us; what may be the pitfalls?

    We had fruitful deliberations in the meeting of the Council on Trade and Industry, which was held on Friday. We received several useful suggestions, especially on the immediate agenda of achieving early revival of the economy.

    I look forward to a similar useful meeting of the Economic Advisory Council.