Ladies & Gentlemen,
I am delighted to be here again amidst such a large and distinguished gathering of political and business leaders. Earlier today, I had the pleasure of meeting President Obama and we shared our thoughts on a wide range of issues concerning our two nations. India’s bilateral relationship with the United States is stronger than ever and we both agreed that the future would be even brighter.
I am speaking to you at a time when the global economy continues to be weak. Several parts of the world are still facing very difficult conditions. This is a time when the world needs new engines of growth. From the point of view of the world’s oldest democracy, obviously it would be nice if the new engines are democratic engines. I am happy to tell you that today India is poised to contribute as a new engine of global growth.
A larger Indian economy has multiple benefits for the world. Obviously, India presents a large and growing market. But India is much more than a market. India is
- a reliable partner;
- a source of high quality scientific, engineering and managerial talent;
- a crucible of development ideas and experiments;
- an efficient source of high quality R&D;
- and a testimony that democracy and rapid growth can co-exist.
As India embarks on a new era of development, it needs to learn much from America’s tradition of entrepreneurship and innovation. America remains at the forefront of scientific and technological innovation from
- air traffic control to air quality improvement,
- from drugs to drones,
from hybrid cars to hydro fracking.
Indeed, to me, America is not just a country with a great past; it is a country with an exciting future. I am therefore sure, that ours will be a partnership which sees both nations benefit.
A very unique feature of the Indo-American relationship is the critical role of the Indian-American community in the US economy. It is rare that emigrants from one nation, who become immigrants in another, enjoy such high respect and repute in both countries. Indian-Americans are a powerful cementing force in our growing economic and cultural ties.
I have just completed two years in office. When I addressed you in 2014, I had just taken over the reins of government. We faced a particularly challenging domestic and external environment. Confidence of investors was at a low. Doubts were being expressed about the future of the Indian economy. The business community was unhappy with the inertia and stagnation that had set in. There was frustration with archaic policies and red tape. In 2 years, we have managed to overcome the odds and register an impressive economic performance.
I want to take this opportunity to describe to you the key elements of our policies. I have said several times that my aim is to reform to transform. For me, reforms are those policies that transform the lives of ordinary citizens. In the last two years, we have taken a comprehensive package of reforms which go beyond more economic reforms. I can classify them into four types.
- First, macro-economic policies to create a strong foundation;
- Second, policies to stimulate growth and employment through investment and trade, and to increase efficiency and productivity;
- Third, policies to ensure that growth benefits the poor and the weaker sections of society, including women and farmers;
- Fourth, a frontal attack on corruption.
Let me start with the macro-economy.
Since we took office, inflation, the fiscal deficit and the balance of payments current account deficit have all fallen. GDP growth, Foreign exchange reserves, stock market valuations, and investor confidence have all increased. This success is the result of a series of well thought out policies. We have legislated a monetary framework with inflation targeting and an independent monetary policy committee to curb inflation. We embarked on a course of fiscal consolidation and our fiscal deficit has been reduced substantially in each of three budgets so far. Even while cutting the fiscal deficit, we have greatly increased productive public investment.
This has been made possible in two ways. Firstly, we imposed carbon taxes on fossil fuels. We took the bold step of de-controlling diesel prices and thereby eliminated energy subsidies. We then replaced them with taxes. A Clean Environment cess has been increased by eight times from Rs.50 per ton to Rs.400 per ton. Globally, there is much talk of carbon taxes but much of it is just that – TALK. We have actually acted. Secondly we have reduced wasteful expenditure through innovative methods and use of technology. Subsidies are increasingly credited directly to bank accounts of the deserving with fool proof biometric identification.
Let me now turn to our policies to stimulate growth and employment. This audience is probably aware of the sweeping liberalization that we have undertaken in foreign direct investment. We have put most sectors on automatic approval and opened up sectors like defence and railways to foreign investment. The long pending insurance law reform was successfully passed. Several insurance companies, including American companies, have already enhanced their investment in the insurance sector. We have taken major steps to increase the ‘Ease of Doing Business’ and have already begun climbing steeply in the global rankings. We are encouraging foreign and domestic investors to set up high quality and efficient manufacturing facilities. We have greatly enhanced investment in roads, railways, ports and waterways to improve logistics. We have made major process improvements in our ports to reduce the time taken for cargo to enter and exit. We admire the start up eco-system in your country. We are making a beginning in replicating it. Our Start-Up India programme has stimulated a new breed of innovators. In 2016, Bengaluru has become the fifth most preferred location for innovation centres. It was not even in the top 10 in 2015.
For our economy to succeed, we need a strong banking system. We inherited a system where cronyism and corruption were believed to be rampant in banking decisions and in appointments to public sector banks. I held the first ever retreat of a Prime Minister with bankers. We have set up clear performance measures and accountability mechanisms. We are committed to ensuring adequate capital. Interference in banking decisions has ended. A new process for appointments has been put in place under a Bank Boards Bureau. Credible and capable bankers have been appointed to head banks. For the first time since banks were nationalized 47 years ago private sector professionals have been appointed in key positions.
I now turn to our policies to ensure that growth is inclusive. We have brought two hundred million people into the banking system through the Jan Dhan Yojana. This is more than the population of most countries in the world. Now, these millions are part of our banking system, and words like ‘interest rate’ have a meaning for them. These people have shown that there is great strength at the bottom of the pyramid. Believe it or not, accounts opened under the Jan Dhan Yojana today have a total balance of almost six billion dollars.
The Jan Dhan Yojana has also transformed the ability of the poor to make and to receive electronic payments. Every Jan Dhan account holder is eligible for a debit card. India’s banks and post offices are also being encouraged to operate ‘mobile ATMs’. A mobile ATM is one where cash can be drawn and simple banking tasks done through a hand held device.
We have provided a safety net through new social security schemes. We have introduced three non-subsidised but low cost schemes covering accident insurance, life insurance and pensions. Because of their massive coverage the premia are low. There are now over 120 million subscribers.
We have paid special attention to gender justice and to empowering women. We have a new savings programme to help pay for girls’ education with a special high rate of interest. To relieve rural women from the health hazards of cooking with firewood, we are giving 50 million new gas connections in poor rural areas. Under our new self-employment financing programme (Mudra), over 70% of the beneficiaries are women. More than 27 million new women-headed businesses have been assisted. We have changed our policies to allow women in combat roles in the armed forces. New rules are increasing the representation of women on corporate Boards of Directors.
Agriculture remains India’s mainstay in terms of providing livelihood. There was a tendency to deprive farmers of subsidized fertilizer by diverting it for the production of chemicals. A simple but very effective solution is neem-coating of fertilizer which makes it unsuitable for diversion. We have moved towards universal neem-coating of urea. It has already saved crores of rupees of diverted farm subsidies and improved fertilizer availability to farmers. It is an example of how simple reforms can be very effective.
We have introduced a Soil Health Card nationally, which tells every farmer the condition of his or her soil. It enables the farmer to choose the best crop and right quantity and mix of inputs. This greatly reduces wastage of inputs and increases crop yield besides protecting the soil. By reducing unnecessary chemical inputs, it is also good for health of consumers. It reduces costs, increases yields, improves the environment and protects the health of consumers. 140 million soil health cards will be issued, requiring a collection of over twenty-five million soil samples, and tested through a nationwide network of nearly 1500 laboratories.
This brings me to an achievement that I think even our worst critics do not dispute. This is the change in levels of corruption. For many years, economists and other experts have held corruption to be one of the main constraints on the growth of any developing economy. We have taken decisive steps to curb corruption. I have already referred to what has been done in public sector banks. We removed discretion in allocation of key resources and moved to transparent auctions of mines, spectrum and FM radio licenses and we have plugged leakage through direct benefit transfer. We have revamped our personnel management to ensure that senior positions are held by persons of integrity. We have launched an on-going campaign against tax evasion and black money. The poor are the greatest beneficiaries of the reduction in corruption.
Looking to the future let me outline what I see as the path we will follow in the coming years.
Firstly, we will continue to have disciplined and prudent macro-economic policies. I firmly believe that sound macro-economic fundamentals are a necessary foundation for long term sustainable growth.
Secondly, we will combine this with a continued stress on inclusion and equity. This is to ensure the fruits of development accrue not to a few, not to many but to all Indians. And this will also mean continuing our attack on corruption.
Thirdly, we will continue to make progress on improving the investment climate and Ease of Doing Business. We want to make India a destination which not only welcomes business but where it is easy to do business. We have largely achieved the first by drastically liberalizing our foreign direct investment policies. We have made a good beginning on the second and will continue to make further improvements.
We will continue to strengthen the "Make in India” initiative. It is not intended for only manufacturing for the domestic market or import substitution. It is as much about making world-class products and services for the whole globe. That is why, for us, improvements towards free trade are important. It is very important for us that developed countries open their markets, not only to goods from countries like India but also to services. I see this as a win-win proposition for the U.S. and for India. India is the future human resource powerhouse of the world with a young hard-working population. In my vision, a partnership between American capital and innovation, and Indian human resources and entrepreneurship can be very powerful. I am convinced we can strengthen both our economies through such a partnership.
We will continue to make our tax policies more predictable. We have made major strides towards predictability by signing a number of Advance Pricing Agreements with the United States. We are committed to taking this further. At the same time, like the U.S., we are cracking down on tax evasion and unfair tax avoidance.
We will continue to open up our defence sector. I am aware that licensing policies can sometimes slow down the process of investing in India’s defence sector. We are exploring a simpler and more efficient project licensing approach for defence. In the field of nuclear energy, we are purchasing six nuclear reactors from Westinghouse which will mark a new era in our nuclear and scientific cooperation. I was delighted when GE became one of the first companies to make a major investment in the newly liberalized railway sector. It is setting up a locomotive manufacturing plant in the relatively poor state of Bihar. I expect many more such investments.
The river Ganga has a special significance for India. The ‘Namami Gange” programme to clean the river Ganga is on the verge of taking off. It will be a big priority over the coming years. This project offers major opportunities for American companies with their expertise in environmental engineering, water and sewage treatment and the like. This project is a high priority for my Government and our aim is to restore the Ganga to its pristine glory.
Ladies and Gentlemen, we have begun our journey towards a transformed India. A transformed India, with one sixth of humanity will mean a transformed world. The journey will be long. But the progress we have achieved so far, convinces me that we will reach our destination. I invite you to join us on that journey. It is a journey which offers the exciting possibility of not only building a better balance sheet for your company but of building a better India, building a better America, and building a better world.