Mukherjee says development objective has to be to reduce disparities

Finance Minister Pranab Mukherjee today said that the country's developmental objective had to be to reduce and ultimately remove inequalities in all dimensions of human life in society.

"Ensuring an adequate pace of growth is a necessary condition in this endeavour," he said in his address to the 91st Annual Session of the Associated Chambers of Commerce and Industry of India (ASSOCHAM) here.

"But rapid and sustained poverty reduction requires inclusive development which would enable people from all strata to contribute to and benefit from economic growth," he said.

He said the Government was aware of the significant disparities in the country that relate to an individual’s access to resources, her capabilities and skill-sets and her attainments on socially desired outcomes and well-being.

Mukherjee said that, for growth to be sustainable in the long-term, it had to be broad-based across sectors, regions and among the different population segments of society.

"Then again the effort has to be to provide for the basic needs and create opportunities to enhance capabilities and incomes in meeting the growing aspirations of the people. For it is then alone that each of us will derive the sense of belonging and also become a part of the growth of the country," he said.

The Finance Minister said that, in a globalised world, where the major developed economies were going through a turbulent time, growth could not be taken for granted in any part of the world, including in the emerging market economies.

He said that, over the past months, deep and widespread economic concerns with a complex mix of real and financial problems had surfaced in Europe, which was a setback to the global recovery.

"Even the tepid economic recovery that we have seen so far in some of the advanced economies is stalling. Unemployment in these economies has not recovered from the crisis highs. Several countries have experienced sovereign rating downgrades. The relatively robust revival in emerging market economies is also beginning to falter. The financial markets, which had never fully recovered from the earlier crisis, are under renewed stress," he said.

Mukherjee said the continuing global uncertainty was also affecting India, with the increased volatility in capital flows resulting in heightened fluctuations in stock and currency markets with attendant implications for investor confidence. Moreover, slowdown in external demand has led to deceleration in the growth of exports in recent months leading to widening of the current account deficit, he said.

"Growth has slowed to just under 7 per cent, as per the advance estimates released by the Central Statistical Organisation. Yet, India is still among the global frontrunners in the growth field, but reinventing the growth track is something that we must not lose sight of. India has to target a double digit growth in the not too distant future. We have shown that we can grow fast but we must learn to sustain it over extended period of time," he said.

The Finance Minister said sustained near-double digit level of inflation had been a major policy concern for the Government over the last two years. It is beginning to show signs of moderation of late with WPI headline inflation declining to around 6.5 per cent in January 2011.

"A tight monetary policy has impacted investment and consumption growth through higher cost of credit. Growth has consequently slowed. Nevertheless, we have been able to keep the adverse impact of global slowdown and uncertainty on our economy to the minimum. I expect this slowdown to be temporary and the economy would soon revert to the high growth trajectory," he said.

According to him, the Indian economy is, in some ways, better placed than many other nations to withstand a fresh round of global economic turmoil.

He said India’s resilience resulted from the fact that the bulk of India’s GDP was domestic demand driven. "India’s External Commercial Borrowings Policy has been successful in maintaining external debt at sustainable levels. India’s banking sector is robust. There is unwavering commitment to reforms to further consolidate our economic strengths," he said.

Mukherjee said policy measures have been taken in recent months to further ease capital controls, making available a framework for pooling of debt finances for infrastructure.

"A Direct Investment Scheme was announced on January 1, 2012 under which Qualified Financial Investors (QFIs) will be allowed to invest directly in Indian equity market. This is the first time that we have taken steps to open up direct access to our capital markets for the individual foreign investors other than the institutional investors and foreign venture capital firms. We have further liberalised FDI in single brand retail, and a consensus for operationalising the decision taken to open FDI in multi brand retail trading is being pursued. Foreign Direct Investment (FDI) flows which had considerably slowdown in 2010-11 have bounced back and as of January 2012 FII inflows have also picked up," he said.

He said the Government had now put in place the New Manufacturing Policy to give a big push to the manufacturing sector with the objective of increasing its share in the GDP to 25 per cent and create 100 million jobs in the next ten years. The Policy encourages the setting-up of New Investments and Manufacturing Zones across the country. These zones would address the problems of infrastructure, would create world class urban centres and also absorb surplus labour by providing them gainful employment, he said.

"We are putting in place an enabling framework for ease of doing business, compliance based on self-regulation, ensuring availability of skills, technology and finance within a supportive environment," he said.

Mukherjee said sustaining India’s growth momentum was critically dependent on improving its factor-productivity through technological innovations and process reengineering. It is also dependent on enhancing the capability of the young population to understand new technology and absorb and simulate it to meet local needs, he said.

"In that context there are at least three areas that we need to focus on. The first area is education and knowledge creation. The second is creating and strengthening of a competitive environment to support private enterprise. The third is to encourage a greater focus on research and design activities (R&D) in our enterprises and in institutions of higher learning. We are making progress in all these areas, though perhaps not at the pace we would ideally like to," he said.

Mukherjee said the path to economic development had to be focused on two parallel objectives.

"On one hand, we have to develop villages, improve agriculture and agro based industries and infrastructure in rural India. On the other hand, we need to empower the rural people and give them new opportunities and provide jobs in keeping with their growing aspirations. They must have the chance to move in step with the modern India, the India that is being talked about around the world. This would take a majority of them into cities and semi-urban areas, where it would be necessary to upscale and improve the infrastructure. The industry and the service sector will have to provide a large share of those opportunities," he said.

"An important requirement for bringing this about is empowerment of labour through skill up-gradation," he said, adding that industry bodies like ASSOCHAM could play a significant role in this and form the bridge between education and industry.

Mukherjee also said there was need to set new benchmarks for implementing initiatives under Corporate Social Responsibility (CSR). He said he was in favour of voluntary social programmes by the corporate sector to create sustainable industrial development model for the country.

"The Government is receptive to ideas and is committed to making the best efforts to push forward on all these fronts that I have alluded to with a view to create sustainable opportunities for growth. I am also sure that the Indian enterprise that has proved and established itself on the international level will come together to meet the challenges before us and take the economy to new heights," he added.

NNN