Savings Rate is Likely to Rise Further: FM - Arrival of India’s Corporations in Global Market Place is Optimistic Prognosis for the Economy

Union Finance Minister Shri Pranab Mukherjee has expressed confidence that we are in a position to sustain high economic growth in the coming decades and create a more inclusive outcome for our society. The ambitious programme of providing unique identities to the people will enhance the access of poor and marginalized to public services and enable efficient delivery of benefits directly to the targeted population, stated Shri Mukherjee while speaking at Hindustan Times Leadership Summit, here today.

The government has adopted a multi-pronged strategy for inclusive growth and to ensure equality of opportunity for all. This includes rapid growth for reducing poverty and creating employment opportunities, improving access to essential services in health and education, empowerment through education and skill development and creating employment opportunities supplemented by the Mahatma Gandhi National Rural Employment Guarantee programme. The Rashtriya Krishi Vikas Yojana was launched with a view to improve agriculture productivity and ensure food security. We have outlined a strategy for taking the green revolution to the Eastern part of India and have also renewed the thrust for the development of physical infrastructure, added the Minister.

The Finance Minister emphasized the need for an enabling Government, which does not try to directly deliver to the citizens everything that they need but steps in to safeguard the interests of citizens who are left out in the growth process.

Following is the text of Finance Minister's speech:

"It gives me immense pleasure to be here today among eminent leaders from diverse fields and opinion makers of our times. I am very happy to see that this event is gradually evolving into an occasion for some serious thinking on issues of India's contemporary relevance. The topic for my speech today namely "Balancing Reforms with Inclusive Growth: Agenda for the Future"- is one such issue with which the Indian polity has been engaged over the last two decades.

The current phase of globalization has shrunk the world and made boundaries between countries irrelevant. At one level, it has reduced us to a single entity, such that developments in one part of the global have implications on the other part, often pronounced one's at that.

As a result, the challenges and opportunities of development, in general, and that of sustaining high growth over an extended period of time, in particular, have become more complex. Moreover, the process of change is not linear, nor is the outcome uniform for everyone. There are always choices to be exercised from competing alternatives and objectives. The process is indeed challenging.

This could not have been better demonstrated than by the unfolding of the global financial crisis. This crisis has suddenly exploded before us the pitfalls of an unquestioning dependence on the functioning of liberal markets to sustain and enhance human well-being. In a sense, it has reinforced a belief that has always been close to every policy maker's heart in India. Yet we have also seen how these very markets have been the means to bring unprecedented prosperity to a large part of the world over an extended period of time. They have opened up possibilities for many of us in the developing world to make progress in addressing the persistent problems of poverty, livelihood, health, education and security.

In an ideal case, there should not be any conflict between the objectives of economic development, the reforms for sustaining high growth and ensuring that growth is also inclusive. These objectives should be mutually reinforcing and an integral part of the development strategy. However, in reality that is not always the case. In India structural factors like poverty, illiteracy, deprivation and lack of adequate connectivity have created segmentation in our markets and among our people. As a result while some of us have been able to ride the wave of prosperity that the economic reforms have ushered in the country, there are others who are struggling to stay afloat, as they can barely participate in the markets.

With development and economic reforms, the focus of economic activity has decidedly shifted towards the non-governmental actors. In fact, the need of the hour is to have an enabling government. Let me elaborate.

An enabling Government does not try to directly deliver to the citizens everything that they need. Instead, it creates an enabling ethos so that individual enterprise can flourish and ordinary citizens can, for most parts, provide for the needs of one another. At the same time, the Government steps in to help those who do not manage to do well for themselves. The Government has to safeguard the interests of citizens who are left out in the growth process. It is this balance in policy that we have tried to evolve since the UPA Government led by the Indian National Congress first came to power in 2004.

The Eleventh Five Year Plan endorsed a need for inclusive growth to ensure equality of opportunity for all. A multi-pronged strategy was adopted. This included rapid growth for reducing poverty and creating employment opportunities, improving access to essential services in health and education, empowerment through education and skill development and creating employment opportunities supplemented by the Mahatma Gandhi National Rural Employment Guarantee programme. The Rashtriya Krishi Vikas Yojana was launched with a view to improve agriculture productivity and ensure food security. We outlined a strategy for taking the green revolution to the Eastern part of India. We also renewed the thrust for the development of physical infrastructure.

For our Government, inclusive development is an act of faith. In the last five years, our Government has created entitlements backed by legal guarantees for an individual's right to information and her right to work. This has been followed-up with the enactment of the right to education in 2009-10. As the next step, we are working on the draft Food Security Bill which is presently in the public domain for discussions. To fulfil these commitments, the spending on social sector has been rapidly increased and now stands at 37 per cent of total plan in 2010-11. Another 25 per cent of the plan allocations are devoted to the development of rural infrastructure. With growth and the opportunities that it generates, we hope to further strengthen the process of inclusive development.

We recognize that the success of this strategy rests on sustaining high growth over an extended period of time. Growth of income is important in itself, but it is as important for the resources that it brings in. These resources provide us with the means to bridge the critical gaps that remain in our development efforts, particularly with regard to the welfare of the vulnerable segments of our population. It is equally important that these resources are effectively used.

We are acutely conscious that if these resources have to bear fruit we have to tackle issues of governance and service delivery. We have taken up an ambitious programme of providing unique identities to the people, focusing initially on the poor. Provision of identity will enhance the access of poor and marginalized to public services and enable efficient delivery of benefits directly to the targeted population.

The Government is striving to improve the regulatory environment in the country. There are no off-the-shelf solutions available to the regulatory dilemmas facing any developing country. Each country has to chart its own path on the regulatory reform road based on its native genius and the conditions on the ground. India too is striving to achieve the golden mean.

The Eleventh Plan set a target of an average 9 per cent GDP growth for the country as a whole. The fact we have been able to average nearly 9 per cent growth in GDP in the four year period from 2004-05 attests to the fact that we have the capacity to do it. Moreover, the success in managing the economic slowdown in the wake of the global financial crisis and engineering a quick turn-around shows a growing maturity for policy management in a globalized world. It has highlighted the importance of pursuing reforms, to make the economy more competitive and the oversight system more efficient and sensitive to new developments.

We have to build and sustain an economy where the growing capabilities and rising aspirations of individuals can be matched with an expanding set of opportunities for people to enjoy. The economy should be able to support productive employment for all those who enter the labour force. It requires a massive scaling-up of our physical and social infrastructure and skill up-gradation. Then alone can the benefits of economic growth percolate down effectively to the most marginalized and vulnerable segments of the population.

Looking ahead, I am very hopeful that we will be able to create the right balance between the need for reforms to sustain high growth and, at the same time, deepening the inclusive character of our development process.

There are several factors that have emerged from the performance of the economy in the last 12 to 18 months. Combined with performance over the last couple of years, this augur well for the Indian economy. The savings and investment rates have reached levels that even ten years ago would have been dismissed as a pipedream for India. As the demographic dividend begins to pay off in India, the savings rate is likely to rise further, provided we are able to create productive employment opportunities. Moreover, the arrival of India's corporations in the global market place is optimistic prognosis for the economy in the medium to long run.

Today, as I stand before you, I am confident that we are in a position to sustain high economic growth in the coming decades and create a more inclusive outcome for our society. I have faith in the Indian entrepreneurial spirits and we have the political will to do the needful to sustain this momentum."