OPENING REMARKS BY PRIME MINISTER AT THE MEETING
OF THE PRIME MINISTER'S ECONOMIC ADVISORY COUNCIL
The following
is the text of the Prime Minister, Shri Atal Bihari Vajpayee’s
opening remarks at the Meeting of the Prime Minister’s Economic
Advisory Council here today:
"A warm welcome to all of you.
We last met about
ten months ago. To be precise, it was September 10, a day before
the fateful happenings in the United States.
September 11 and its aftermath had a profound
impact on the world economy and on our economy, too.
Indeed, even before this unexpected turn of events,
our economy had been passing through a slowdown. Members of your
Council will recall that the dominant theme of our discussions
was how to beat the slowdown and to achieve a quick revival. It
is a tribute to the inherent strength and resilience of our economy,
that it has now entered a phase of recovery.
The challenge before us today is: How can we
consolidate this recovery and put the economy on a sustainable
path of high-growth?
Three days ago, we had a meeting of the Council
on Trade & Industry. I could see that smile was back on the
faces of our business leaders. They unanimously observed that
"it is time to voice optimism".
However, they too underscored the same imperative:
namely, that we must work together to secure stability of high
growth rates in the medium and the long-term.
Friends, we have set ourselves an ambitious GDP
growth target of 8% a year during the 10th Five Year
Plan. Is this achievable? Yes, I have no doubt about it. Over
the past two decades, India has been among the six fastest growing
economies in the world. No major democracy, barring Japan in the
1960s and 1970s, has at any time matched India’s growth
performance in this period.
In particular, the services sector, which accounts
for more than one-half of our GDP, has grown at 8.5% annually
over the past 7 years. Exports have grown in the past decade from
5.5% of GDP to 9% in the case of merchandise, and from 3% to 8.5%
of GDP in services. This year, our growth in the farm sector also
has picked up.
What are the challenges that we must overcome
in accelerating our GDP growth rate to 8% and beyond? Let me briefly
touch upon a few critical development-related issues. I must clarify
that the list is not exhaustive:
- The first and foremost challenge is that of implementation.
I repeat what I have been saying to all the people in the Government
– at the Centre and in the States – that our policies and programmes
are only as good as their implementation. In the past four years,
our Government has shown that we are determined to bridge the
gap between promise and performance. Implementation of the new
telecom policy; promotion of the IT sector; the ongoing work
on the National Highway Development Project; and, lately, the
successful completion of a number of disinvestment initiatives
which have resulted in a transparent and non-discretionary procedure,
which is a model of good governance – these are just a few examples.
But we are aware that a lot more needs to be done. If you were
to ask me, "What is your first priority?", I would
say that it is to improve implementation capabilities across
the board in the Government.
Our new Finance Minister made an incisive point
in his remarks before members of the Trade & Industry Council.
He said that a major burden on our economy is the way our Governmental
machinery functions. It is designed to achieve delay, not development;
its preoccupation is procedures, not performance.
We have begun a comprehensive review of the current
regulatory procedures, which impose significant transaction costs
and delays on implementation of projects. Often these are traceable
to poor project preparation, appraisal, and absence of a system
of evaluation of the experience of completed projects to draw
lessons for the future. These issues are common to both physical
and social infrastructure.
A High Level Official Working Group, headed by
the Secretary Industrial Promotion, is working on both sets of
issues. It has completed its report on the upstream issues of
the public sector. It will also soon recommend concrete steps
to re-engineer the entire set of regulatory processes at the Central,
State, and Municipal levels. For example, we shall take steps
to remove several growth-hindering hurdles that have been placed
in the name of environmental protection, which can be got rid
of without harming the environment.
- The second challenge is to further speed up economic reforms
so that India becomes a clear-cut market economy, with the Government
withdrawing from production, barring a few clearly specified
strategic sectors. However, Government must retain and further
strengthen its role in policy-making, regulation and facilitation.
We need to ensure that regulation of markets is by competent
and independent regulatory agencies. These should follow transparent
procedures, guided by the Government’s clearly articulated policy-objectives.
- Third, Government would have to continue to shoulder dominant,
though not exclusive, responsibility for physical and social
infrastructure. However, the laudable goals of a Welfare State
will now have to be pursued within a new framework – mainly
by broadening and deepening the scope of public-private partnership
in education, healthcare, shelter, sanitation, care of the aged
and the poor, and promotion of sports, arts and culture.
I think that economists, policy planners and
those involved in successful examples of public-private partnership
need to work together to develop innovative and practical ways
of expanding this concept at all levels – from national to local.
- Fourth, even as try to speed up growth, how do we ensure that
it will be employment-oriented growth, and not jobless growth
or growth with less jobs? The challenge of unemployment will
become more acute as the youth segment of our demographic spectrum
continues to expand in the coming years.
The Special Group, headed by Dr. S.P. Gupta,
Member of the Planning Commission, has recently submitted its
report on "Targetting Ten Million Employment
Opportunities Per Year". This,
as you know, is our Government’s solemn promise to the people.
We have taken this report seriously and will soon prepare an action
plan to implement its salient recommendations.
- Fifth, higher growth rate demands higher rate of savings and
channeling the savings into productive investments. Here, we
need to remove the imperfections that are plaguing our financial
markets. It should be our special endeavour to ensure that the
poor and the unorganized sector have access to savings, credit,
and insurance services.
- Sixth, another essential element of our poverty alleviation
strategy will have to be reduction and re-targeting of subsidies,
so that the essential consumption of the poor, including social
services, is protected, but the overall fiscal deficit is reduced.
Barring those who deserve subsidy, we should develop a culture
of making all others pay for what they use.
For example, as you know, the root of the problem
in the power sector – which is one of the specific areas of discussion
today – is that nearly half of the power sold is not billed, and
much of what is billed is not collected. More or less, this is
true about higher education, public transport, municipal services,
and so on. No reform can succeed if this sad state of affairs
persists. The time has come for everyone to realize that, the
nation is paying a heavy price in the form of slow and stunted
development, for what citizens fail to pay.
- Seventh, in the past four years, we have paid much attention
to expanding and modernizing various aspects of connectivity
– both physical and digital. The country is already reaping
the benefits of better and cheaper telecom and Internet services.
Our ambitious initiatives to develop highways and rural roads
are being speedily implemented. To further widen our commitment
to connectivity, the Government will soon launch an initiative
for accelerated completion of Railway projects that are both
critical and remunerative. If necessary, we will raise non-budgetary
resources for this purpose. Putting Indian Railways on a path
of fast-track growth is a fitting way to celebrate 150 proud
years of this institution that has contributed so much to the
nation.
- Lastly, our long-term growth strategy should be closely aligned
to our strategy on population. The encouraging demographic transition,
which has been revealed in the 2001 census, needs to be further
accelerated. Our goal should be for total fertility rate to
reach replacement levels within the time frame given in the
National Population Policy, without recourse to measures which
have previously caused major setbacks in India and elsewhere.
In doing so, we should ensure that a greater proportion of the
population is of working age, and savings rates increase further.
Friends, I now invite your ideas and suggestions,
after my two Cabinet colleagues have made brief presentations
on reforms in the power and petroleum sectors.
Thank you".