FM’s address at CII National Conference and Annual Session

Following is the text of Finance Minister, Shri Pranab Mukherjee’s speech, delivered at the CII National Conference And Annual Session, here today:

“It gives me great pleasure to address this inaugural session of the CII Annual Session and National Conference on ‘Implementing Inclusive Growth and Development’. At the very outset, I would like to complement CII in its efforts to work closely with the Government on diverse policy issues; enhancing efficiency, competitiveness and expanding business opportunities for industry as a whole through a range of specialised services and global linkages. Over the years CII has provided a platform for public debate on diverse key issues and has thus played a key role in generating public opinion, building consensus and crystallising policy inputs.

I am delighted that you are organizing a National Conference and the main theme of your deliberations is “Implementing Inclusive Growth and Development”. You may recall that in my budget speech this year I mentioned that for UPA Government inclusive development is an act of faith. I have always viewed inclusive and equitable growth as the key to the long term peace and prosperity of our country. Empowering the poor and the socially disadvantaged and ensuring that they benefit more than proportionately from economic growth is a core agenda of the Government.

In the post liberalization phase the Government has realized that despite achieving consistently high level of economic growth the benefits do not percolate to the bottom layer of the masses. Irrespective of the recent debate on the number of persons below the poverty line it is a fact that a significant chunk of our population has yet to benefit from our growth story. The Eleventh Plan, therefore, aims at achieving growth process which will meet the objectives of inclusiveness and sustainability and the Plan document clearly state that inclusive growth yields broad based benefits and ensures equal opportunities for all. We also know the fact that approach to poverty reduction is a necessary but not sufficient condition to eradicate poverty and deprivation. It is a complex process and need multi-pronged efforts.

The Government, in the recent past, has made all efforts to put in place necessary legal and policy framework, stepped up budgetary resources especially for the social sector, agriculture and infrastructure development and has also been alive to the issues of governance and implementation. Overall objective is to remove economic, regional and social disparities and let the benefits of growth and development trickle down equitably to every citizen irrespective of caste, creed and region.

As you all know that we have put in place statutory framework for the right to information, right to education and right to work. Efforts are on to pilot the Food Security Bill that would guarantee availability of food grains to the poorest section at affordable price as a matter of right. For the protection of workers in the unorganized sector, the Unorganized Sector Workers Social Security Act, 2008 would be soon operational with the setting up of National Social Security Fund with an initial allocation of Rs. 1,000 crore. The Government has also decided to contribute Rs. 1000 per year to each account opened during the current financial year by unorganized sector worker under the New Pension Scheme.

Keeping in view the objective of inclusive development, budgetary allocation this year on social sector has been increased to Rs. 1,37,674 crore which is about 37 per cent of the total Plan outlay for the current financial year. This will be supplemented with another 25 per cent of the plan allocation earmarked for rural infrastructure. Allocation for Mahatma Gandhi National Rural Employment Programme (NREGA), which guarantees minimum 100 days employment to rural unemployed, has been increased to Rs. 45,000 crore. We have also stepped up budgetary allocation under Indira Awas Yojana and Rajiv Awas Yojna for rural and urban weaker sections housing schemes respectively. To generate more employment opportunities for urban unemployed, budgetary allocation under Swaran Jayanti Shahri Rozgar Yozna has also been stepped up.

The Government’s strategy also focuses on two key sectors namely agriculture sector and micro, small and medium enterprises (MSMEs) sector. The objective is to reduce poverty by increasing productivity in agriculture and creating employment opportunities outside farm sector by expanding labour intensive industries in MSME sector. To achieve agricultural sector growth rate of 4 percent of GDP, apart from ongoing schemes, I have announced details of four-pronged strategy in my budget speech covering agriculture production, reduction in wastage of production, credit support and thrust to food processing sector. To ensure inclusive growth in agriculture sector, thrust is needed in building participatory approach for natural resources management such as participatory irrigation and watershed management, joint forest and waste land management. Participatory management can ensure equity, sustainability and food security at village and panchayat/taluka level.

Micro, small and medium enterprises (MSMEs) sector, being labour intensive sector, is the key to address the problems of rural and urban poverty. MSME sector faces a number of problems - absence of adequate and timely banking finance, non-availability of state of the art technology, low production capacity, ineffecient marketing, non availability of highly skilled labour at affordable cost etc. Despite its commendable contribution to GDP, exports and employment, MSME Sector does not have access to alternative avenues of raising the required capital unlike the large companies. You are aware that Government in the recent past have stepped the funding to strengthen this sector and several schemes to upgrade skills and technology are under implementation. But I feel much more is needed to be done. I am sure that the issues relating to increasing the access of MSME units to capital market and Financial Institutions and how best can the Corporate Sector assist the MSME units in upgrading technology and marketing would form part of the deliberations in the conference today.

I can see that the private sector has the potential and resources to play a catalytic role in inclusive development and growth. The private sector has made great strides through microfinance, providing rural development capital while freeing many rural people from the grip of moneylenders. Private sector has an important role to play in filling the rural education gap especially in the area of vocational training to address the growing shortage of skilled workers. Vocational training is an area where companies can get more immediate returns on their investment, either by conducting their own training or by financing vocational programmes. The corporate sector, therefore, needs to come forward and contribute as for as possible in strengthening and expanding the vocational and skill development institutions especially in the rural and poverty ridden urban areas.

Over all governance and implementation is also one of the key determinants in ensuring inclusive growth. When we compare the performances at State level the issue of governance comes to the fore. Some States have implemented the development programmes and schemes efficiently and are therefore way above the other States in terms of poverty reduction, social protection, literacy rate, health indicators and over all human development index. By contrast, some States do not seem to have effective governance and implementation machinery and have not performed well. The Centre Government, in partnership with the States, is making all efforts to stop leakages and pilferages and improve the delivery systems. We are keen to use alternative modes and adopt information technology for efficient delivery system. Debate is going on how to improve Public Distribution System and stop wastages and leakages by introducing smart cards and use data base to be generated by the Unique Identification Authority of India. I am sure in due course the Government would adopt system that not only strengthens the PDS but also reduces expenditure. The Government also is keen to strengthen assessment and evaluation of all the programmes and schemes. With the setting up of an Independent Evaluation Office, which has been announced in my budget speech, I expect there would be an objective evaluation of the impact of our major schemes and the government would be in a position to allocate its scarce resources efficiently and effectively.

I am also concerned about the prevailing high inflation in the economy. Inflation erodes real income. It hurts the marginalised and the poor segment of our society the most. WPI based food articles inflation has declined from 18.63 % on 1st January this year to about 16% on April 24th. The average inflation based on the Consumer Price Index (Industrial Workers) for the months of February and March 2010 has been about 14.6%. But inflation seems to be on the decline now. CPI based inflation is higher mainly because food items have significant weight in the index basket and I expect the inflation based on CPI (IW) to decline rapidly as the prices of food items is now declining. A good monsoon, as predicted by the Indian Meteorological Department (IMD) in its first monsoon forecast, is vital for the economy and it would bring down the prices of essential commodities. I am hopeful that the way the Government meticulously planned economic recovery in the past one year likewise we would beat the high inflation in the coming few months.

Coming to the overall macro performance, going by the industrial sector growth, especially in the past six months, I expect GDP numbers for the financial year 2009-10 should now be around 7.2 %. This achievement is particularly significant, considering that India had an unfavourable monsoon, which dampened the growth of the farm sector. I expect strong growth in the current financial year that stands to benefit from further improvements in business confidence. IMF, in its latest World Economic Outlook, has projected India’s GDP growth to be 8.8 per cent in 2010, and 8.4 per cent in 2011 and I expect even better performance.

I can see that today’s function is being attended by leading entrepreneurs and experts and hope you would have a threadbare discussion on the topic you have chosen for this Conference. As always I am sure your deliberations and debate would sum up in a very useful policy inputs and insights. I look forward for your valuable inputs.

I thank CII for giving me this opportunity. I wish all the best in your endeavors.”

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