Inclusive Development Needs to be Combined with Consolidation of Public Finances, Financial Stability, Employment Generation and Economic Growth to Achieve Unhampered Growth : FM

Union Finance Minister, Shri Pranab Mukherjee said that our economic policies need to be designed in such a manner that the redistributing process does not feed off the public finances and the growth process itself is not hampered. Shri Mukherjee said to achieve this objective, inclusive development needs to be combined with consolidation of public finances, financial stability, employment generation and economic growth. The Finance Minister Shri Mukherjee was delivering the inaugural address after inaugurating the two-days International Conference on 'Economic Policies for Inclusive Development', here today. The Finance Minister said that some of the aforesaid competing concerns could be addressed through an optimal policy mix which should also be one of the discussion priorities of this international conference. 

Nobel laureate, Professor Michal spank, Shri Rangarajan, Chairman Economic Advisory Council to the Prime Minister, Shri Ashok Chawla, Finance Secretary, Dr. Kaushik Basu, Chief Economic Advisor and Shri Govindrao Director of National Institute of Public Finance and Policy were also present on the occasion. This is the First such International Conference being organized by Department of Economic Affairs, Ministry of Finance in collaboration with National Institute of Public Finance and Policy. The objective of this International Conference is to suggest out of box ideas for financial inclusion and achieving higher GDP growth rate beside containing inflation.

The Finance Minister, Shri Mukherjee further said that India has experienced a fairly long period of rapid economic growth and since 2003-04, there has been a further step up in India's GDP growth rate with the economy moving to a high trajectory growth rate of 8.5% to 9% per annum. He said that India's economy has become remarkably resilient to both external and domestic shocks. He said that it has not only recovered rapidly from the global economic downturn but also took the monsoon failure last year in its stride and is now showing robust growth. The Finance Minister said that 11th Five Year Plan endorsed a need for inclusive growth to ensure equality of opportunity for all. He said that a multipronged strategy was adopted that included rapid growth for reducing poverty and creating employment opportunities, improving access to essential services in health and education especially for the poor, empowerment through education and skill development and creating employment opportunities supplemented by the Mahatma Gandhi National Rural Employment Guarantee Scheme. 

The Finance Minister said that in the last few years, we have created entitlements backed by legal guarantees for an individual's Right to Information and his/her Right to Work. He said that 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 National Food Security Bill which is presently under examination by an Expert Committee set-up by the Prime Minister under the chairmanship of Dr. C. Rangarajan, the Minister said. He further said that to fulfil these commitments the spending on social sector has been rapidly increased. With growth and the opportunities that it generates, we hope to further strengthen the process of inclusive development, the Minister added. 

The Finance Minister said that the emerging economies though faced with brighter growth prospects are confronting financial instability caused by international capital flows. He said that in advanced economies there is a need to maintain the policy focus on recovery and management of public debt while the emerging economies, on the other hand, need to leverage their growth to improve social outcomes and at the same time monitor the financial sector. He further added that these and other related themes including 'Growth and Employment in Post-Crisis World', 'Corporations and Economic Development' and 'Policies for Inclusive Development' would be discussed in this two days Conference. He hoped that the lessons drawn from this conference will benefit not just the Indian economy but also the world at large. 

The Finance Secretary Shri Ashok Chawla delivering the welcome address said that though Indian economy has shown resilience in past many years as far as its GDP growth is concerned yet it faces the challenge of high inflation especially food inflation. Shri Chawla said that the Central Government has taken various anti inflationary measures to contain the inflation especially the food inflation at reasonable and acceptable level. He said that higher agriculture growth will not only help in achieving food security but also in containing food inflation. He said that the Government has accorded high importance to financial inclusion to cover the entire gamut of financial services and to ensure that gains of growth reach to the maximum number of people at large. 

The complete text of the inaugural address made by the Union Finance Minister, Shri Pranab Mukherjee after inaugurating the two-day intentional conference is given below: 

"I am very happy to be here today to inaugurate this conference organized by the Economic Division of the Ministry of Finance. Let me start by congratulating Prof Kaushik Basu, Chief Economic Adviser who has been very keen to hold this conference. Though the Finance Ministry has had ongoing research programmes with several premier institutions, this is the first international conference that has been organized. I am aware that this conference has brought together some well know economists from India and abroad, key policymakers and corporate leaders to deliberate on issues of our contemporary relevance. This is for me a matter of great satisfaction. 

I am not an economist. But having spent several decades of my working life dealing with issues related to economic policy in the company of many economists, I am aware of the importance of knowledge development, research and innovation in the field of economic policy. I am certain that effective policies can be arrived at only by exploring and demonstrating the complexities, opportunities and risks of economic scenarios. 

Ours is an age of ideas and innovation. The pace of innovation and knowledge generation has increased rapidly in modern times. The prosperous societies of today have reached their states of well being not because of the coal mined from their soils or the goods traded on their markets but through the power of great minds. It is essential that policymakers are kept abreast with the latest developments in diverse fields. This conference would allow India's Ministry of Finance to open its windows to new ideas. I hope that this conference would not be a one-off affair but evolve into a much anticipated annual event. 

According to some, the world of economic theory and the world of practical policy have little in common. I hold a somewhat contrary view. The two universes I believe run parallel to each other and need to communicate from time to time. This is exactly what I hope this conference would achieve. It is important to merge the abstract clarity of economic theory with the practical problem-solving approach of the policymaker. This endeavour may seem difficult, but let me remind you that some very effective policy solutions like withholding taxes have arisen from the minds of theoretical economists. At the same time economic theory draws on real world experiences to generate its concepts. It is therefore fitting that for this conference the ministry has chosen National Institute of Public Finance and Policy as its partner. NIPFP is a leading Indian think tank for fiscal policy, with a global reputation. 

There are times when economics can be confusing, making it difficult to exercise political judgments and policy decisions. When we were in the middle of the global financial crisis that began in 2007 and the consequent global economic slowdown, economists first told us that the recovery would be V-shaped. When the quick recovery did not work, we were told that the recovery would be U-shaped. Nowadays, I keep hearing that it may be W-shaped. I guess this ambiguity is in the nature of economics. This is what makes it a challenging subject. It is important that we have our eyes open to new evidence and new analysis to guide us in making the most appropriate policy decisions. 

India has experienced a fairly long period of rapid economic growth and the economy has also evolved considerably. Since about 2003-04, there has been a further step-up in India's GDP growth rate with the economy moving to a higher trend growth path of 8.5 to 9 per cent per annum. More importantly, the economy has become remarkably resilient to both external and domestic shocks. It not only recovered rapidly from the global economic downturn, but also took the monsoon failure last year in its stride and is now showing robust growth. 

Despite this, it is evident that the fruits of this prosperity have not been enjoyed equally by all our citizens. Moreover, development needs to be approached in a comprehensive manner so as to include individual freedoms, access to affordable health-care, quality education, social empowerment and social security as the desired goals. This brings me to the theme of this conference namely "Economic Policies for Inclusive Development", a matter close to my heart. 

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, especially in India where 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 waves of prosperity that the economic reforms have ushered in the country through the liberalization of markets, there are others who are struggling to stay afloat, as they can barely participate in the markets. 

India's Eleventh Five Year Plan endorsed a need for inclusive growth to ensure equality of opportunity for all. A multi-pronged strategy was adopted that included rapid growth for reducing poverty and creating employment opportunities, improving access to essential services in health and education especially for the poor, empowerment through education and skill development and creating employment opportunities supplemented by the Mahatma Gandhi National Rural Employment Guarantee Scheme. The scheme provides for legal guarantee of 100 days of wage employment in a financial year to every rural household whose adult member volunteers to do unskilled manual work at minimum wage rate for agricultural labour. It is estimated that during the current financial year, around 37 million households have been provided employment under this scheme. In all 1.25 billion person-days have been created under the scheme. There has been a substantial attempt to broad base the programme and target weaker sections including Schedule Castes and Schedule Tribes population, with women accounting for nearly 52 per cent of person-days created under this scheme. 

The Rashtriya Swasthya Bema Yojana, a scheme for providing health insurance coverage for below poverty line families has been launched. The Rashtriya Krishi Vikas Yojana has been initiated with a view to improve agriculture productivity and ensure food security. We are implementing a four-pronged strategy covering (a) improvement in agricultural production by extending the green revolution to the Eastern part of India while preserving gains in other areas (b) reduction in wastage of produce, (c) credit support to farmers, and (d) a thrust to the food processing sector. There is also a renewed focus on the development of physical infrastructure. 

In the last few years, we have 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 National Food Security Bill which is presently under examination by an Expert Committee setup by the Prime Minister under the chair of Dr. C. Rangarajan. To fulfil these commitments the spending on social sector has been rapidly increased. With growth and the opportunities that it generates, we hope to further strengthen the process of inclusive development. 

Financial inclusion is a key determinant of sustainable and inclusive growth. We have accorded high importance to financial inclusion to cover the entire gamut of financial services pertaining to savings, credit, insurance and transfers. We are conscious that if our efforts 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 through the Unique Identification Authority of India. Provision of identity will enhance the access of poor and marginalized to public services and enable efficient delivery of benefits. 

Needless to say, much still remains to be done. This is a challenging task in terms of resources, analytical issues, policy design as well as practical aspects of public service delivery. While I am aware that a fair amount of research work has focused on these issues, it is now imperative that their results are projected onto the policy matrix. 

We need to design policies in a manner that the redistributive process does not feed off the public finances and the growth process itself is not hampered. To this end, inclusive development needs to be combined with consolidation of public finances, financial stability, employment generation and economic growth. How some of these competing concerns could be addressed through an optimal policy mix should be one of the discussion priorities of this conference. 

The challenges I just described are faced not just by the Indian economy but probably the world at large. As a consequence of the global economic crisis the advanced economies are grappling with the issues of public debt and resulting financial strains. The emerging economies though faced with brighter growth prospects are confronting financial instability caused by international capital flows. In advanced economies there is a need to maintain the policy focus on recovery and management of public debt. The emerging economies, on the other hand, need to leverage their growth to improve social outcomes and at the same time monitor the financial sector. These and other related themes including 'Growth and Employment in Post-Crisis World', 'Corporations and Economic Development' and 'Policies for Inclusive Development' would be discussed in this gathering. The lessons drawn from this conference will benefit not just the Indian economy but also the world at large. 

I would like to extend my thanks to all the participants, especially to those who have travelled significant distances facing the challenges of varying time zones and persistent jetlag. I wish you all a very stimulating and fruitful period of deliberations."