Good policy, not good fortune

Experts are unanimous that India is one of the world economy's brightest spots. We have low inflation, a low balance of payments current account deficit, and a high rate of growth. This is the result of good policy, not good fortune. Let me elaborate.

Between 2008 and 2009 crude oil prices fell steeply from a peak of $147 per barrel to less than $50 per barrel. This was a steeper fall than between 2014 and 2015. Yet in 2009-10, India's fiscal deficit, its current account deficit and its inflation rate, all got substantially worse. And this slide was from a higher base figure for all three. But in 2015-16, all three have improved, from a lower base.

We have not been lucky with global trade or growth. Both are low, and have not helped us in terms of export stimulus.

We have not been lucky with monsoons or weather: 2015 and 2014 have both been drought years. Drought was compounded by unseasonal hailstorms. Yet food grain production has remained much higher and inflation much lower than in the last comparable drought year, which was 2009-10.

For India to be at the top of global growth tables is an unusual situation. India's economic success is the hard-won result of prudence, sound policy and effective management. I will elaborate on some of our policies later, but for now let me emphasise just one - fiscal consolidation. We have met ambitious fiscal targets in each of the previous two fiscal years. We have reduced the deficit even while increasing capital expenditure. And the reduction has come despite an unprecedented steep cut in the Centre's share of tax revenues, in the award of the 14th Finance Commission. For 2016-17, we have targeted a fiscal deficit of 3.5 per cent of GDP (gross domestic product). This will be the second-lowest level in the last 40 years.

Our growth rate is acknowledged as the highest among major economies. There are some who remain confused and have said that the growth rate does not "feel" right. Perhaps, I can be of assistance to them in reducing the confusion, by stating facts in place of feelings.

There has been a smart pick-up in credit growth after September 2015. Credit off-take between February 2015 and February 2016 increased by 11.5 per cent. Overall fund flow to the corporate sector through equity and borrowings of various kinds - domestic and foreign - has increased in the first three quarters of 2015-16 by over 30 per cent.

Net foreign direct investment in the third quarter of the current financial year was an all-time record. But to me, more interesting is the dramatic increase in certain important sectors. In the period from October 2014 to September 2015, FDI (foreign direct investment) in fertilisers was $224 million compared to just $1 million in the period October 2013 to September 2014; in sugar, it was $125 million compared to just $4 million; in agricultural machinery, it doubled to $57 million from $28 million. These are sectors that are closely connected with the rural economy.

In the year to September 2015, FDI in construction activities showed a 316 per cent growth. Computer software and hardware had 285 per cent growth. FDI in the automobile industry grew 71 per cent. This is concrete evidence that the Make in India policy is having an effect on employment-intensive sectors.

In a difficult global environment for exports, manufacturing output has fluctuated. However, several key sub-sectors of manufacturing are growing rapidly. Motor vehicle production, which is a strong indicator of consumer purchasing power and economic activity, has grown at 7.6 per cent. The employment-intensive wearing apparel sector has grown at 8.7 per cent. Manufacturing of furniture has grown by 57 per cent.

Looking towards the future, let me turn to agriculture. In the past, the emphasis has been on agricultural output, rather than on farmers' incomes. I have set the objective of doubling farmers' income by 2022. I have laid this out as a challenge, but it is not merely a challenge. With a good strategy, well-designed programmes, adequate resources and good governance in implementation, this target is achievable. A doubling of farmers' incomes will have strong benefits for other sectors of the economy.

Let me outline our strategy. First, we have introduced a big focus on irrigation with a large increase in budgets. We are taking a holistic approach, which combines irrigation with water conservation. The aim is "per drop, more crop".

Second, we are focusing on provision of quality seeds and on efficiency of nutrient use. The provision of soil health cards enables accurate selection of inputs according to the requirements of each field. These will lower costs of production and increase net income.

Third, a large portion of the harvest is lost before it reaches the consumer. In perishables, the loss occurs in transit. In non-perishables, it happens during storage. We are reducing post-harvest losses through big investments in warehousing infrastructure and cold chain. We have increased the outlay for agricultural infrastructure.

Fourth, we are promoting value addition through food processing. As an example, in response to a call from me, Coca Cola has recently started adding fruit juice to some of its aerated drinks.

Fifth, we are creating a national agricultural market and removing distortions. A common electronic market platform is being introduced across 585 regulated wholesale markets. We want to ensure that a higher share of the final price goes to the farmer, with less going to middlemen. The introduction of FDI in marketing of domestic food products in this budget is with the same objective.

Sixth, we have introduced the Pradhan Mantri Fasal Bima Yojana. It is a comprehensive nationwide crop insurance programme, which offers farmers protection from risks beyond their control at an affordable cost. This scheme will ensure that their incomes are protected in times of adverse weather.

Seventh, we will increase income from ancillary activities. Partly, this will be through poultry, honeybees, farm ponds and fisheries. We are also encouraging farmers to use uncultivated portions of their land for growing timber and placing solar cells.

I am confident we will achieve the targeted doubling of farmers' income. Dr M S Swaminathan, the doyen of Indian agriculture, seems to agree. He wrote to me expressing gratitude for the farmer-centric Budget. He welcomed the income orientation given to farming. He went on to say, and I quote, "On the whole, the Budget has tried to be as pro-farmer as possible subject to the limitation of resources. Seeds have been sown for agricultural transformation and for attracting and retaining youth in farming. The dawn of a new era in farming is in sight."

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Edited excerpts from Prime Minister Narendra Modi's speech at Bloomberg India Economic Forum, in New Delhi on March 28