‘We have no reason to believe the Indian economy is back to the 1991 situation. Our fundamentals are much stronger’

Excerpts from Prime Minister Manmohan Singh's statement in Rajya Sabha,August 30.

Written by Express News Service | Published: September 4, 2013 12:22:53 am

I respect the honourable leader of the opposition,Arun Jaitleyji. I am glad he has recognised that there is a need for consensus. Building a consensus is the responsibility of both the government and the principal opposition party. I wish the conduct of the principal opposition party was consistent with letting the ruling party govern while the opposition performs its task of opposing and criticising wherever it is necessary. But,if the record of the last nine years is looked at,the principal opposition party has never reconciled itself that it was voted out of power in 2004 as well as in 2009.

The leader of the opposition has talked about investors having lost confidence in our country. I don’t think that is correct. But I would be the last person to deny that there are certain events and happenings in our country which are a source of concern to investors,both domestic and foreign. I do recognise that there is a problem,that this problem can be resolved only if the opposition party does recognise its responsibility for the conduct of Parliament. This is not something which can be done unilaterally; it takes two to clap and you have my assurance that our party is very sincere in ensuring that essential legislation,which has a vital bearing on the fortunes of our country in the years to come,is passed by this Parliament with approval. It is the responsibility of all members of this House to send out a message that India remains a viable,bankable,credit-worthy proposition.

The leader of the opposition has talked about corruption. Corruption is there and has been there. In recent years,the RTI and the activism of the various agencies of the government has brought out certain things which are regrettable. But these corruption episodes do not have to be an occasion to disrupt Parliament in a manner that we cannot do our essential business. There are institutional arrangements in place,various committees of Parliament,there are courts of the country which can grapple with these issues.

Shri Raja has referred to inflation. I share the concern about inflation. Inflation hurts the poor. But we have ensured,in the last nine years,that the public sector agencies,which are in charge of public distribution,have not had to face any increase in prices. We have kept the prices of wheat and rice from the public sector agencies at more or less the same level as remained in 2003. This is an important measure whose relevance is often not recognised,but I would urge the honourable members that some rise in prices was inevitable to correct the adverse terms of trade against agriculture. Without agricultural growth,solid agricultural growth,we cannot bring about a healthy growth of the economy as a whole,and our experience was that our farmers needed better terms of trade. But one consequence of that is that the farm prices had to be raised by an amount which was far in excess of what was done by any previous government,and that structural inflation has got built into our economy. We have to grapple with it,we will grapple with it and,fortunately,the fact that we are going to have a good harvest as a result of a good,favourable monsoon,provides an opportunity to deal with food inflation in a manner which was not possible before.

Shri N.K. Singh referred to action by the Group of 20. I will participate in the Group of 20,and I may say that,whatever some members of the House may say about me as the prime minister,I command a certain status,certain prestige,certain respect in the council of the Group of 20. It is quite clear today that the way the world economy is functioning,there is no adequate coordination of the macroeconomic policy,monetary and fiscal policy of developed countries and yet we recognise that in [an increasingly interdependent world,whatever is done in the developed countries sends its shivers in the developing world. So,in a more equitable world order,it is only appropriate that the developed countries,in pursuing their fiscal and monetary policies,should take into account their repercussions on the health of the economies of the emerging countries and other developing countries. That is a concern that I have been voicing throughout my participation in the meetings of the Group of 20,and I will continue to do so.

Shri Rai mentioned how depreciation is good for the economy. I didn’t say that depreciation is a universally beneficial phenomenon. It has pluses and it has minuses. It is a mechanism of adjustment in an economy,which has got out of balance its macroeconomic fundamental and therefore,to some extent,it provides a corrective. But there are consequences. As I mentioned in my speech,the rise in the price of petroleum products,the rise in import prices,certainly has consequences in accentuating inflationary pressures,and to that extent,the pressures on monetary policy to take corrective measures also increases,which also,in turn,has consequences on what happens to the climate for investment in the country.

Onion prices are prices which rise and fall depending upon the seasonal trend in production. No Central government can say that it can control all prices. And certainly,as Shri Sharad Pawar has pointed out,some months ago,he,as the agriculture minister,had written to all state governments to arrange for storage of onions and yet,no state government took advantage of that. If they had taken advantage of that,in the lean season the prices would have been more stable than they were. As for Shri Yechury’s comments that we are back to 1991,I say it with all emphasis at my disposal that we are not at that level. We will not go to that extent. We have no reason to believe that the Indian economy is today back to the 1991 situation. Our fundamentals are much stronger. We have,for example,an exchange rate which is market-determined. We have foreign exchange reserves which are equal to seven months of imports. Therefore,there is no reason for anybody to believe that we are going down the hill and that 1991 is on the horizon.

Professor Ram Gopal Yadav raised issues with regard to exchange-rate adjustment. As far as GDP is concerned,the fears that GDP growth in India may go down to 3 per cent is entirely unfounded. I sincerely believe that this year our growth rate will be about 5.5 per cent and that we have the ambition,we have the means and we have the resources and the willpower to put the economy back on the rails of high,stable growth rate of 6 to 8 per cent in two-three years to come.

Shri Satish Misra had asked why our exports were falling. Now,our exports are falling partly because of international factors — the world economy is slowing down — and partly because of the growing uncompetitiveness of Indian exports. Fortunately,the recession of the rupee provides an opportunity to,at least,put in place a partial corrective and I,therefore,sincerely hope that our exports will do better in the coming months.

Why foreign investments are not coming? First of all,foreign direct investment is not effective. As far as the speculative flows are concerned,speculators don’t calculate what is in the long-term interest of the investor. They are short-term maximisers and,therefore,come and go. Speculators are not the best judges of the health of the economy. I invite honourable members not to be too influenced by speculative inflows and speculative outflows,and trust the ability of our government to tackle India’s economic problem with all sincerity and conviction.

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