Text of address by Kamal Nath on “India is the future: challenges and opportunities” at IIPA
“I am delighted to be here at the Indian Institute of Public Administration this evening. The IIPA is an Institute of international repute, a power house for research and a crucible of ideas and best practices in governance, public policy and administration. It is a privilege to be interacting with an audience of your calibre.
I have been asked to speak to you on ‘India is the future’ – this is quite different from speaking on the ‘future of India’ – which would require a fortune-teller or an astrologer! I am neither. I am a politician. We politicians generally have to talk a lot – to our constituents in rural areas, to audiences abroad, to colleagues in Parliament and to the media. We talk on all kinds of subjects and to all kinds of audiences. In the process, it almost seems as though we have speeches on tap, as if it was fast food!
But today’s talk for me is more in the nature of a well-savoured banquet. The issue on which that I speak to you all today does not require too much conjecture. It is merely and simply a statement – the statement that the future is indeed India. I have repeatedly said that we are living in such fast changing times, that the past cannot be merely projected into the future. The past has to be used to simulate the future, so that we can speak of it with authority – so that we can, in fact, mould it, fashion it to our purposes.
I was in Australia a couple of months ago, addressing the Lowy Institute, which has come to be known as one of the most prestigious think tanks in Australia. You will be surprised to know that the very first paper produced by the Lowy Institute was “India: The Next Economic Giant”. What impressed me was that this phrase had no question mark attached to it! Clearly, recent developments have shown that the confidence expressed by the author was not misplaced!
The Indian economy today is poised for the kind of leap that none of us has even imagined – leave alone witnessed – before. Ever since we began our liberalization programme 14 years ago, when our current Prime Minister Dr. Manmohan Singh was our Finance Minister, we have experienced tremendous change; and yet I say that the kind of growth that we are today poised to accomplish is far greater. Who would have thought 14 years ago (when we had to pawn the gold from our treasury in order to service our international debt) that today we would have foreign exchange reserves of 140 billion dollars? Who would have thought 14 years ago, (when economists had almost made a theory of what they called the ‘Hindu rate of growth’ of 2 and 3 per cent) that today we would see a sustained and constant growth of 6 to 8 per cent? Who would have thought that in the last year we would get 8 billion dollars in the form of FII, and that the sensex would zoom past 7000 points?
When the Congress government, supported by Left Parties, took office in India a year ago, many people in India and abroad were skeptical. Given the pressures of coalition politics, doubts were expressed about whether we could sustain the economic reforms – economic reforms which, incidentally, we ourselves had started in 1991 and which, fortunately, successor governments did not abandon. Our reform process has been a calibrated yet sustained one. But a reform process alone is not enough; it has to be part of a grand vision – a vision of the future, a vision for the future.
When I became the Commerce & Industry Minister I decided that the first thing to do was to frame a coherent Foreign Trade Policy. I dispensed with the old method of tinkering with export and import rules every year and publishing an annual Exim Policy. I felt that we must have an integrated vision for our exports. No longer were we required to only generate dollars. What was more important was to generate employment. And it is this objective that guided the formulation of the first ever Foreign Trade Policy which we announced last year. As a target we declared our intention to double our share in world trade within five years.
We are well on our way to this. Last year our exports were 80 billion dollars, which was 24% higher than the previous year. Our imports were 105 billion dollars. Thus our economic engagement with the world was 185 billion dollars. Within three years we shall take this economic engagement (exports & imports) to 500 billion dollars. But dollars are only a means of measuring our achievements. What is important is not the dollars earned by these exports, but the employment generated, the economic activity that this stimulates in the Indian economy. It is only by stimulating economic activity that we can leap forward.
As a country we have often been pilloried for our economic policy. We have been told we are too bureaucratic; we have been told that we are poor cousins to China, and we have been told that our policies restrict growth rather than promote it. We have also been told that our infrastructure puts foreigners off. Some of this is true to an extent. I would be less than truthful if I did not admit it. But not all of it. For those of you who still think this way, I would like to share the findings of the annual research survey conducted by the global consulting firm AT Kearney. The study polled CEOs and top decision-makers of the world’s largest 1000 firms. In 2002, India was the 15th most attractive FDI destination worldwide. In 2003, India moved up to the 6th spot. In 2004 we moved to number 3. In the not too distant future, I am confident we shall be number 1.
In fact, India has a rather liberal FDI policy. Practically all sectors are open for FDI. Where equity caps exist, these are being reviewed and our attempt is to do away with them completely, except in a few sensitive areas where we will have to adopt a policy of gradualism. Recently we have opened up the construction-development sector; and even the retail sector – till now regarded as a holy cow – is under examination for constructing an India-specific model, a model that creates new job opportunities rather than one which displaces our mom-and-pop stores. In FDI we are looking for greenfield investment – investment that creates employment, investment that brings in technology, and not just investment that replaces Indian capital.
A sound infrastructure base is crucial for both industry and trade. We estimate that about 150 billion dollars are required to be invested in infrastructure in the next 10 years. Infrastructure projects involve large capital outlays, long gestation periods and high leverage ratios. To achieve the targeted 8 per cent GDP growth, infrastructure bottlenecks are required to be removed – roads, ports, electricity, water, all require a massive infusion of capital. While completing the Golden Quadrilateral highway project, Prime Minister Dr. Manmohan Singh has spelled out a vision for a parallel railway track connecting the four metros dedicated solely to trade and the movement of goods traffic. This, in turn, would push the economy into a higher growth trajectory.
I want here to once and for all correct the misconception that India is poor in manufacturing. This implication is conveyed as a backhanded compliment which goes something like this: ‘India is the Back Office of the world, while China is the world’s Factory’. While complimenting us on our expertise in Services, the implication is that we are poor in manufacturing. This is far from the truth. Of course, we are good in Services & Business Process Outsourcing, but that does not mean that we lag behind in manufacturing skills. In sectors like auto-components, chemicals, apparels, pharmaceuticals and jewellery we can match the best in the world. We have the skills, we have the positive environment and attitude. All we want is investment & better technology. Today few other countries have embraced foreign technology and management best-practices with as much enthusiasm as has India.
I would not like to compare India with China. Comparisons are always invidious. I would only speak about India’s unique strengths – our positive points and why I think the future belongs to us. In India it is our institutional strengths that we are proud of. We are a democracy and wear it on our sleeve. We do not see democracy as a hindrance or a luxury, but a necessary and desirable way of life, part and parcel of the Indian ethos. And along with this ethos comes the Rule of Law, a vibrantly free Press, a fiercely independent judiciary and administrative transparency. These may slow things down a bit, but only in the short term. What is more important is that India has an open system with social and political safety valves, and a regulatory environment that provides comfort, long-term stability and security to the foreign investor and Indian entrepreneur alike.
In India, our one billion people are our greatest strength. We have got around the population problem, and now our demographic growth rate is less than 2%. We have a literacy rate of 70% (up from a mere 15% at Independence). We have engineering and management institutes which can hold their own against the best in the world. (And, of course, we also have the English language!) Our objective is how to leverage our social strengths into economic gains. We want to bring economic prosperity to our people, and bring it fast. We no longer dream of a better life for our grandchildren or children – we want a better life for ourselves. Rapid economic development within our own lifetime is what we seek.
India is a Great Democracy – no doubt about it. The question is, can we now make it a Great Power? In 1947 India commanded the world’s sympathy, as a nation that had just freed itself from the yoke of colonialism. Less than six decades down the line we command the world’s awe and respect. But awe and respect can be fleeting if they are not anchored to a solid economic base. I believe that we have already laid the foundations of that solid economic base. If we build upon it correctly and swiftly, no power on earth can snatch away the future from India – India will indeed be the future.
Thank you.”
SB/MRS
(Release ID :10297)