India is not an island, nor can we pretend that we can grow in splendid isolation. We are part of the global economy, and what happens across the globe, will affect India. Many lessons may not have been learnt in the last 20 years. The global economy declined from 3.9% in calendar year (CY) 2011 to 3.2% in CY 2012. It is expected to achieve a growth rate of only 2.9% in CY 2013. Advanced economies are expected to grow at only 1.2% in this calendar year. The Euro zone area, which is one of our major trading partners, is expected to shrink 0.4% in this year, and therefore, what happens in India and what we are able to do, must be seen in the context of the global economy.
It has now been 16 months since I returned to the finance ministry, and from time to time, I’ve made statements on behalf of the government on our policy stance and the direction in which we will proceed. The first statement was on August 6th 2012, followed by statements early this year on the current account deficit (CAD), and then a statement taking stock on November 1st, 2013. While what is right and wrong can be debated, the opinions don’t stop coming. I recall President Harry Truman’s famous statement when he said the economists said on the one hand, “Mr. President you should do this”, while “on the other hand you should do this”. After listening to over a dozen economists, he said, “For heaven’s sake, get me a one-handed economist!”
So the point is, if you take the right decisions and be patient, results will flow. Now, what are the right decisions, can be debated, whether we are taking the right decisions can be debated, but I maintain that if we take the right decisions and be patient, you will find that the economy grows. It is not long ago when we witnessed 9% growth. Sometimes I see despair written on many business persons. One of them asked me, how are you so cheerful? I said “I don’t have your money or your debt!” Business will have its ups and downs, there are business cycles. As will a country’s economy have its ups and downs, there are cycles. The world is going through a bad cycle, but all the evidence indicates, that, perhaps, there are signs of upturn in global growth. And if there is an upturn in global growth, there will be an upturn in India’s growth. Any one who has a business that is locked in the global economy, will vouch for what I say.
Since I returned to the finance ministry on August 1st 2012, the best thing that we’ve done, is to acknowledge the facts. We are not in denial. In fact, in my first statement, I acknowledged that we have a problem with the fiscal deficit, we have a problem with the CAD, we have a serious problem with inflation, and we have a problem on the investment front. We have a problem about perception of our tax laws and our tax administration. But we have acknowledged each one of these problems and faced them squarely. Wherever we had to draw a red line, we drew a red line, and I maintain that no red line that I’ve drawn, will be breached under any circumstances. Wherever we had to create institutions, we created institutions like the Cabinet Committee on Investments (CCI). Wherever we had to change laws, we have changed the laws like making Safe Harbour or the GAAR rules. Wherever we needed time to implement changes we’ve said yes, these changes will come into force after two years or three years.
How is the world looking at us, is a good benchmark to say how we should look at ourselves. This is the silly season of poll surveys and predictions. I will give you one more to add to that list. You may treat it with cynicism or applause. Recently, 1600 executives from 72 countries in companies that are in 20 industry sectors, were asked to respond to a number of questions. Two-thirds were publicly listed companies. One-half were CEO or CFO or C level executives, and the median of the global revenues of these companies was $5bn. There has been a dramatic change in the level of confidence between October last year and this year. Sixty-five per cent of the respondents thought that the global economy was improving. The same number were confident of the economic growth. Fifty-eight per cent affirmed that their company was focused on growth over the next 12 months, 57% remained optimistic about emerging markets. Their main concern was global, political instability. When asked, where outside their home or local market they would invest, they placed Germany on rank 15, Indonesia at 10, the US at 5, Canada at 4, China at 3, Brazil at 2 — and at rank 1 was India. 1600 executives surveyed in October 2013 placed India on rank 1 where they will invest over the next 12 months.
Another study was by Global Forum and Transparency under the OECD rates countries on transparency and exchange of information for tax purposes. India is one of fifty countries that went through two reviews. Only a handful of countries were rated as overall compliant. India is one of those. We share the status with countries such as Australia, Belgium, Canada, Denmark, France, Japan, Korea, New Zealand, Sweden. The UK, the US and Singapore are only rated as largely compliant — not fully compliant. As expected, Cyprus, Virgin Islands, Luxemburg, are non-compliant. So within a year, the perception about India has changed, the peer review about India’s tax policies and tax administration has changed.
Why do I quote these surveys and studies? I don’t produce growth. I don’t produce growth, I don’t deliver growth. No government delivers growth — govt delivers the conditions for growth. Industry delivers growth, farmers deliver growth, service providers deliver growth, workers, artisans, homemakers, exporters, importers, manufacturers, mine workers deliver growth. When I hear people say “nothing happens, everything has come to a standstill”, I would like to believe you are referring to Lutyens Delhi! Outside Lutyens Delhi, please remember, that millions and millions of people are working every day. They are producing millions of tonnes of wheat, paddy, sugarcane and oil-seeds. They are producing millions of tonnes of coal. They are standing near blast furnaces and producing steel. They are standing on assembly lines and producing cars and exporting them, they are going into the deep sea and producing fish and exporting it. Millions and millions of people in this country are working, working everyday, working hard. It is they who can produce growth, we can only create conditions for growth, and I believe in the last 16 months, we may not have created all the conditions for high growth, but we have certainly made it better, we have certainly prepared a better pitch for high growth.
In the last 15 and going into the 16th years, there have been two major formations in the govt in India. In fact, we have had remarkable political stability — in 16 years, we have had only two prime ministers and four finance ministers. Compare it with some other countries of the world. Between 1998 & 2004 we had one govt in two spells of one year and five years under one prime minister. Between 2004 and now, we have had another govt completing 9 years and going on the 10th year under one prime minister.
Just keep these two periods in mind — 1998 to 2004 and 2004 to 2009. The best GDP growth rate was recorded in 2006-07 at 9.6%, the worst was in 2002-03 at 4%. The lowest fiscal deficit was recorded in 2007-08 at 2.5%, the lowest revenue deficit was recorded in 2004-05 at 1.1%, the best saving rate was in 2007-08 at 36.8%, the best investment rate was in 2007-08 at 38.1%, the best tax to GDP ration was in 2007-08 at 11.9% the largest accretion to foreign exchange reserves was in 2007-08 at $92bn. I am sorry I cannot pick a best year under any head between 1998 and 2004! Why do I say this? I say this because facts and perceptions differ. We are going through a period of stress, but I am absolutely confident that we can overcome this period of stress and return to the high growth path.
What this country lacks, is a vigorous, energetic, intellectual debate. There is hardly any debate in this country on matters of movements or on matters of concern. Yes academics, researchers write about it — but where is the debate among political leaders? Which political party has asked the question “why has the Insurance Bill not been cleared yet”? “Who has blocked the GST?” Why are states loathe to take steps against hoarding and profiteering? Why do people stop power plants, steel plants, dams big and small, mining? Who tried to stop the Food Security Bill? What is each political party’s position on the fiscal deficit and measures to contain it? What are political parties’ positions on importing gold? Do parties support disinvestment, do parties support FDI? Apart from a stray speech here and there, where is the debate among political parties? How much do you know about the view of each major political parties on each of these issues?
What is lacking, is a fierce, rigorous intellectual debate. We must debate these issues. No one can wish them away, no one can pretend these issues do not exist …and silence is not debate. I have always, whenever I have had opportunity or whenever I want to seize an opportunity, stated my views on record, and my views are formed after the debate within the govt, and so, are the govt’s views — and by and large, the party’s views. It is quite possible that the party could have a slightly nuanced approach which is quite different from the govt’s view — but I don’t find the rival view which debates the views. What you hear, is a voice here, a voice there. I think it is important for you, especially the informed, educated sections of leadership amongst the different sectors of the economy, to ask parties tough questions. It is important for anchors to ask tough question on these issues. In fact, I believe there is greater and deeper and fiercer debate on these issues even in the secret Communist Party plenum of China, than in India! In the next six months I hope that these issues will be debated.
Before I conclude, I want to say that we will continue to work everyday until the last day of the term of this govt. Anyone who is an elected politician, knows that his term is for five years, whether he will be reelected or not is for the people to decide — with the apologies to anchors who think they decide, it is the people who will decide. Nobody thought that the UPA govt would be re-elected in 2009. Certainly, no poll, no survey, no opinion poll, no exit poll, said that the UPA would win.
Therefore, I can pledge on the behalf of my govt, that we will work every day until the last day of the term of this govt and await the verdict of the people. Whether we have taken the right decisions, will be known as the results come in. After the major tax changes and major investment decisions were made, the CCI was put in place and investment decisions were cleared, and we did our part in going around the world and convincing industry, businesses and investors that we are serious about the fiscal deficit, the CAD and inflation, the first term results was Q1 and Q1 was at 4.4%. It was disappointing, but at that time, I said: “One has to be patient”.
If you are patient and if you continue to do the right things, you will find that we will climb back on the high growth path. I am absolutely confident that India will get back to the high growth path. In 2014-15, our growth rate will be close to 6%, in 2015-16 it will be close to 7%, and in the year after, we will be back to the high growth of 8%. I have not the slightest doubt about that, irrespective of who is in the govt & who is the PM & who is the FM. But we have to do the right things, we have to be watchful about it.
For the immediate future, I do not know, but am totally confident that we must not take a misstep, we must continue to walk on the path that has been laid out — and the path that has been laid out is fiscal prudence and discipline, containing the CAD, encouraging exports, revitalizing the manufacturing sector in India which has been neglected for a long time, continuing to support the service providers, growing enough food for ourselves and exports, becoming completely as far as possible self reliant on the agriculture sector, and reforming the institutions, improving governance, liberalizing the financial sector and engaging with the world.
If we continue to walk this path, as we did only a few years ago before we turned inwards, I have no doubt that we will climb back to the high growth path. When you go back to your offices, your businesses, your industries, I want you to shed any sense of gloom or despondency. Think of the millions and millions of farmers, workers, miners, fishermen and artisans who work everyday to make this country’s economy strong. And if you put your shoulders to the wheel, and show the confidence which 1600 executives around the world have shown, I have no doubt that the best is yet to come, and we will take our rightful place. And we will take our place as the third largest economy in the world in 2030.
Source From: http://timesofindia.indiatimes.com/rssfeeds/784865811.cms