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President’s Address outlines New Vision for India: Focus on growth, low inflation, expansion of soci

	June 08, 2009

President’ Ms Pratibha Patil’s first address to joint sitting of both Houses of Parliament last Thursday has highlighted the concerns and expectations of the “aam admi” — (the common person) claimed by the to be at the core of its policy of “growth with inclusion.” Outlining the new Congress-led Government’s policies, the President said that the new Government would revive economic growth and help millions of poor with higher spending and expansion of social programmes, despite fears of a growing fiscal gap.



Restoring growth momentum: The President unveiled new Government’s reforms plan in the financial sector and PSU disinvestment, coupled with measures to tackle the economic slowdown by focusing on sectors hit by global recession and boosting public investment.

While pursuing reforms, the pension and financial sectors and disinvestment in PSUs would be the priority areas for the UPA Government.



"The current financial year is expected to see a slowing down of growth on account of the global recession ... Our immediate priority must be to focus on management of the economy that will counter the effect of the global slowdown by a combination of sectoral and macro-level policies," President Pratibha Patil said in her address to Parliament.



Presenting the agenda of the new Government, she said the focus would be on adversely-affected sectors like infrastructure, exports, small and medium enterprises, and housing to restore the growth momentum.



“My Government will ensure that the growth process is not only accelerated but also made socially and regionally more inclusive and equitable,” Patil said. Accordingly, the immediate priority of the Government would be to counter the effect of the global slowdown and ensure that the growth momentum of the economy is restored.



Highlighting the importance of returning to a higher growth path, the President pointed out that high growth was necessary to provide the Government the capacity to expand opportunities for employment. The high growth of the economy in the recent years had generated more resources for the Government to take up various initiatives.



Stating that the country had benefited from large foreign investment flows in recent years, the President said that such flows, especially the foreign direct investment, need to be encouraged through an appropriate policy regime.



The Government will focus attention on small and medium enterprises, exports, textiles, commercial vehicles, infrastructure and housing as they have been adversely affected by the global economic slowdown, she added. The Congress’s re-election victory has brought hopes that the ruling coalition would be able to move forward with reforms that had been shackled by its former communist allies in the last 2004-2009 Government.



Unveiling the reform agenda of the new Government, she pointed out that citizens have every right to own a part of the shares of public sector companies while the Government retains majority shareholding and control. “My Government will develop a roadmap for listing and people ownership of public sector undertakings while ensuring that Government equity does not fall below 51 per cent,” Ms Patil said.



The speech left nobody in doubt that public sector disinvestment would be back on the agenda, even though the Government would not lose majority stake in such companies.



Public-private partnership norms will be revamped in a bid to get more investment for infrastructure. Coal sector reforms will be initiated and the Government will remain committed to introducing the goods and services tax.



The Government will also take steps to infuse more capital in banks to help boost economic growth which is at a six-year low.

Transformative Agenda for governance: The President outlined a paradigm shift in governance, to be effected through (i) an ongoing independent evaluation and public reporting of progress in implementing Government schemes; (ii) big strides in e-governance; (iii) decentralisation and empowerment of panchayats and non-government organisations to implement and monitor Government schemes; (iv) breaking barriers between departments and schemes to achieve synergy, integration and better utilisation of existing resources; (v) innovative regulation of health, education and provision of public services; (vi) liberal use of technology in welfare transfers and achieving public awareness; and, (vii) institutionalisation of the Government’s basic commitments by requiring all Cabinet notes to specify how their proposals would enhance the goals of equity or inclusion, innovation and public accountability.

The Government has set out a five-year ``transformative agenda for governance'' that promises a big deal to women and the poor. It aims to pump in massive resources into roads, ports, education, rural development, telecom and health while bringing the tabooed disinvestment back onto its reform agenda.



There is a 25-point action plan for the Government’s first 100-days agenda that focuses on social and welfare schemes, judicial reforms and strengthening the machinery for effective delivery of all the Government's schemes. In addition, the second phase of Bharat Nirman, with enhanced targets for each of the schemes under it was outlined, with the promise of a new bill on food security for all, an urban housing scheme under the Rajiv Gandhi Awas Yojana and an expanded rural employment guarantee scheme.





Populist schemes



Patil said the Government would expand programmes like the rural job scheme and enact a food security law to guarantee cheap grains for poor families.

The big bang approach saw the Government promising to make good its poll promise of 25 kg of rice or wheat a month at Rs 3 a kg for all BPL families through a National Food Security Act which comes with a Rs 50,000 crore bill.



Like NREGA, which makes it mandatory for BPL card holders to be given 100 days of work a year on demand, the NFSA will guarantee that cheap foodgrain is made available to those who can claim it. The Government plans a similar initiative in education through the Right to Free and Compulsory Education Bill while seeking to universalize secondary education.



A key vision is to strengthen the existing right to information into ‘duty to publish’ on the part of the Government. Except for matters of strategic importance, the rest of Government decision making should be made available in the public domain, without anyone specifically asking for it, so that members of the public can act on the information and hold the Government accountable.

Also on the cards are an investment friendly regulatory and legal framework for public private partnerships (PPPs) and policy changes to re-orient subsidies so that they benefit only the truly needy.

On the indirect tax front, the President said that the roadmap for moving towards a goods and services tax (GST) will be “vigorously” pursued by the Government.



On the energy sector, the Government would be guided by the integrated energy policy. “The effort would be to see that at least 13,000 MW of generating capacity is added each year through a mix of sources — coal, hydel, nuclear and renewables. Also, the pace of oil and gas exploration will be intensified and India’s oil diplomacy aggressively pursued.





New deal for inclusive growth



The Prime Minister, Dr Manmohan Singh, has admitted that the electoral mandate in favour of the UPA-led coalition comes with the challenge of rising expectations. He said the “decisive half decade” should be used to reduce poverty, create employment and promote industrialisation. He further made it clear: “This verdict is for inclusive growth. It is a verdict for equitable development. It is a verdict for secular and plural India.”

The new Government has assumed office at a time when the country has been severely impacted by the global financial and economic crisis leading to significant slowdown in industrial and services sectors, demand recession in export and domestic markets, and mounting job losses. The slowdown is much more painful for the poor and weaker sections in the absence of any safety net.



The core agenda for inclusive growth must include: A new deal for agriculture, a greater thrust to manufacturing by strengthening physical and social infrastructure and a significant improvement in governance and delivery.





Neglect of Agriculture



Clearly, the time has come to provide the much-needed new deal to agriculture. The prolonged neglect of the sector in the post-reform period is the major cause of persisting poverty despite over half a century of battle to eradicate it.



The share of agriculture in GDP has declined steadily from 36.4 per cent in 1982-83 to just around 18 per cent now, even as this sector provides employment to some 52 per cent of the country’s workforce.

Not surprisingly, the average income of this overwhelmingly large population is less than a quarter compared to those dependent on the rest of the economy.

Incidentally, this is also the reason for the growing agricultural indebtedness which manifested in rising incidence of farmer suicides in many parts of the country prompting the former UPA Government to announce a huge farm loan waiver scheme of over Rs 71,000 crore.

Against this backdrop, accelerating the growth of this sector assumes critical importance not only to push up the overall GDP growth, but also to make growth more inclusive.



To achieve this, it would be necessary to step up public investment in the sector significantly along with efforts to ensure that not only institutional credit to the sector increases but it also reaches more number of farmers.

With the area under cultivation remaining constant, serious efforts are needed to improve crop productivity. This would call for building an outcome-oriented perspective in the implementation of public programmes in the area of irrigation, fertilisers, use of high-yielding varieties of seeds etc.

The other areas requiring urgent attention are the strengthening of research and extension services and risk mitigation measures such as crop insurance, weather insurance, price risk mitigation and expanding the livelihood opportunities for rural population outside the farm sector.



Manufacturing



Despite some resurgence of manufacturing activity from 2002-03 to 2006-07 on the back of strong domestic and export demand, the share of this sector in GDP is just around 17 per cent, much below its true potential.

A good feature of the recent resurgence in this sector was the growing competitiveness, especially in sectors such as automobiles, auto components, telecommunications, electronics, pharmaceuticals, cement, steel and readymade garments.



Even so, the growth of the sector in the period of recent economic boom was much lower than what was recommended by the National Manufacturing Competitiveness Council (NMCC) in 2006. The Council had suggested that the rate of manufacturing growth has to reach 12-14 per cent per annum to raise its contribution to GDP to at least 23 per cent by 2015.

To ensure that this sector grows at a healthy pace, small and medium enterprises need policy support and public sector enterprises should be made competitive through further reforms.



Unfortunately, the major impediments facing the sector to achieve the kind of growth suggested by NMCC are the infrastructural bottlenecks — both physical and social infrastructure.



Apart from huge slippages in the development of highways, roads, railway corridors and ports, the country has been facing perennial power shortages.

Widespread power shortages affect agriculture and industrial production apart from raising the cost of production. The efforts to reform the ailing power sector have been repeatedly short-circuited by poor governance and lack of political will.



To make matters worse, transmission and distribution losses remain a whopping 35-40 per cent due to poor maintenance of plants and power thefts.

In the area of social infrastructure, there are glaring deficiencies in elementary and higher education, health, availability of skilled and properly trained labour force.



Empowering the poor with quality education and skills would be a more effective way of bringing about inclusive growth rather than handing out doles to the poor.



Governance and delivery



Poor governance has now become a major cause for worry. There are huge leakages and rampant corruption in the plethora of anti-poverty schemes, launched over the years and more often the benefits fail to reach the targeted people. Even after spending over Rs 300,000 crore of tax payers’ money over the last five years on poverty alleviation schemes — both old and new — the goals are yet to be attained.



The previous Government’s flagship programme, Bharat Nirman, launched in 2005 for creating rural infrastructure, for instance, could not achieve even a third of its target.



The inordinate delays in the Central sector projects have been costing thousands of crore rupees every year. Public Accounts Committee report has revealed huge misuse of funds in the Prime Minister’s rural road scheme.

The much-touted Public Distribution System (PDS) has failed to provide food security to millions of poor.



In all, the anti-poverty programme, the accent hereafter will have to be better governance and delivery rather than allocation of more funds.