Broadening the social base of development not only improves well-being but also widens the home market for business. Thus, equitable growth can by itself generate more growth. A more educated and healthier workforce is more productive... This is why our government has committed large resources to social and human capital development — in education, in health care, in rural development, in housing and in rural infrastructure. It is our endeavour to ensure that all marginalised groups and regions join the dynamic growth processes in the mainstream economy. Despite the challenges we continue to face, we must recognise that poverty has declined at a pace never seen in the past 200 years. More effective social safety nets are falling in place. People look forward to a brighter future for themselves and their children.
It is in this context that we should see the major drive we have launched recently towards direct cash transfers. The drive is to transfer government benefits directly to bank accounts of individual beneficiaries. The Unique Identification programme of having Aadhaar numbers for all residents is going to be the basis of this huge transformation. The government is rolling out Aadhaar-based services rapidly, so that benefits like scholarships for students, pensions for the aged, health benefits, MNREGA [Mahatma Gandhi Rural Employment Guarantee Act] wages and many other benefits are transferred directly into bank accounts using Aadhaar as a bridge. This will reduce leakages, cut down corruption, eliminate middlemen, target beneficiaries better and speed up transfer of benefits to eligible individuals. It will, at one go, bring in millions of people into our banking system and mainstream them into our economy.
Even as we make our growth process more inclusive, we cannot lower our guard in pursuing policies that restore growth momentum to the economy. This task has become more onerous because the global environment for growth has become less supportive. Between 2003 and 2008, the years of nine per cent growth, the Indian economy benefited from a more benign global environment. Since 2009, this environment has become more challenging. As a result, and also because of some domestic constraints, economic growth rates have come down to a range of 5.5 to 6.0 per cent. Our export growth has declined and the fiscal and current account deficits have gone up.
This has had a ripple effect, dampening economic growth as well as investor sentiment. We are today seized of the need to step up investment and savings rates commensurate with the requirements of eight to nine per cent GDP [gross domestic product] growth in the 12th Five-Year Plan. It is with this objective in mind that our government has taken a series of measures aimed at reviving investor sentiment, controlling the fiscal and current account deficits and improving infrastructure.
Some of the decisions we have taken were politically difficult and the naysayers and the cynics have tried to halt us in our tracks. But we had the courage of our conviction and the interests of our people at heart.
Well-targeted subsidies have an important role to play in softening the harsh edges of extreme poverty. But it is necessary that we all understand that the subsidy bill, as it has grown in recent years, is constraining the government in its efforts for the economic well-being and empowerment of our people. Under pricing of energy, particularly electricity and petroleum products, has greatly affected the resources available for investments in infrastructure as well as and social development. The subsidies on oil alone are more than what the government spends on health and education put together...
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Last year, the Central government’s fiscal deficit touched a high of 5.9 per cent of our GDP. This was clearly unsustainable. The finance minister has come out with a road map to reduce it to 5.3 per cent this year and to three per cent by 2016-17. Our government is serious about moving in this direction. Our action in correcting distortions in energy pricing, reducing diesel and LPG [liquefied petroleum gas] subsidies, was aimed to achieve this objective.
As challenging as the fiscal deficit has been the rising current account deficit in the balance of payments. Given the global environment, investors have become risk-averse and global trade has slowed down. To address this challenge, we have liberalised our policy on foreign direct investment [FDI]. Our decision on FDI in multi-brand retail, civil aviation, power-trading exchanges and broadcasting must also be viewed in this larger context. Bills on liberalising FDI limits in banking and insurance are currently before Parliament. Each of these decisions is based on sound economic logic. But they were also based on larger concerns about national security and the need to insulate India from the persistent global economic slowdown. I am afraid that those who oppose these moves are either ignorant of global realities or are constrained by outdated ideologies. For example, when I hear the debate on FDI in retail, what I hear are arguments against large-scale organised retail, and not against FDI in retail.
The steps we have taken recently are only the beginning of a process to revive our economy and take it back to its trend growth rate of eight to nine per cent. We need to complete the exercise that was begun on GAAR [General Anti Avoidance Rules] and taxation of the IT [information technology] sector. The day before yesterday, the Cabinet has approved the constitution of a Cabinet Committee on Investment. This would help in the issue of clearances for major projects in a time bound manner. We will speed up the disinvestment process, which will also revive our equity markets...
The Land Acquisition Bill recently approved by our Cabinet with all the misgivings that Kanodia has expressed, will soon user in a more fair and transparent regime for land acquisition.
Excerpts from Prime Minister Manmohan Singh’s speech at the 85th Annual General Meeting of Ficci in New Delhi on December 15