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PM Narendra Modi addresses 6th Delhi Economics Conclave
JAM vision will serve as bedrock of many initiatives to come: PM Modi
JAM is about Just Achieving Maximum: PM Narendra Modi
India is doing better –GDP growth up, inflation down; FDI up, Current Account Deficit down; revenues up, interest rates down: PM Modi
We have embarked on a course of fiscal consolidation. We have entered a monetary framework agreement with the RBI to curb inflation: PM
We must reform to transform. It helps citizens, especially the poor, achieve a better life. It is Sabka Saath, Sabka Vikas: PM Modi
We have brought 190 million people into the banking system in the last 17 months: PM Narendra Modi
Our financial inclusion reform has been transformational, says Prime Minister Modi
Jan Dhan Yojana has transformed the ability of the poor to make and to receive electronic payments: PM Modi
India has tremendous entrepreneurial energy that must be harnessed for becoming a nation of job-creators, rather than job seekers: PM
Pradhan Mantri Mudra Yojana has provided more than 6 million loans to small businesses for a total value of nearly Rs 38,000 crores: PM
We are creating an environment that fosters innovation & start-ups through Atal Innovation Mission: PM Modi
Agriculture is India’s mainstay in terms of providing livelihood. We have introduced a series of reforms in this sector: PM
We have introduced Universal Account Number which will remain with employee even when he changes jobs: PM Modi
We have started empowering unorganised sector employees by giving them a Universal Identity Number: PM Modi
Swacch Bharat will impact not only health & sanitation but also uplift status & security of women: PM
We have undertaken major managerial improvements in the transport sector: PM Modi
Pace of award of new highway works increased from 5.2 km per day in 2012-13 & 8.7 km per day in 2013-14 to 23.4 km per day now: PM Modi
Our work on ‘Make in India’ and ‘Ease of Doing Business’ is of course well known: PM Modi
The growth rate of trade exceeded GDP growth from 1983 to 2008: PM Narendra Modi
We should not limit our idea of reforms to a few standard notions. Our idea of reforms should be inclusive and broad-based: PM

My colleagues in government,

Friends and Distinguished Guests from India and abroad,

I am happy, to be here today, to address the Sixth Delhi Economics Conclave.  This is a good platform for bringing together economists, policy-makers, and thought-leaders, from India and abroad. I compliment the Ministry of Finance for organising it.

Your topic of discussion is JAM, that is, Jan Dhan Yojana,  Aadhaar  and Mobile.  This JAM vision, will serve as the bedrock of many initiatives to come.  For me,  JAM is about  Just Achieving Maximum.

  • Maximum value for every rupee spent
  • Maximum empowerment for our poor
  • Maximum technology penetration among the masses

But let me start by taking a brief look at the Indian economy. By almost every major economic indicator, India is doing better, than when we took office 17 months ago.

• GDP growth is up and inflation is down.
• Foreign investment is up and the Current Account Deficit is down.
• Revenues are up and interest rates are down.
• The fiscal deficit is down and the rupee is stable.

Obviously, this did not happen by accident. And the world economy is not exactly doing well. This success, is the result of a series of well thought out policies. Many of the purely macro economic reforms we have undertaken, are probably well known to this audience. We have embarked on a course of fiscal consolidation. We have entered for the first time into a monetary framework agreement, with the Reserve Bank to curb inflation. Even while cutting the fiscal deficit we have substantially increased productive public investment. This has been made possible in two ways. Firstly, we have imposed, carbon taxes on fossil fuels. We took the bold step of de-controlling diesel prices and thereby eliminated energy subsidies. We have replaced them with taxes. The coal cess has been increased by four times from Rs 50 per ton to Rs 200 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 like the use of technology. Some of the methods, are part of your agenda, such as using Aadhaar to target subsidies to the deserving. These are reforms that you are probably aware of. But our reforms are far broader, and far deeper, than is generally recognised.

Before I elaborate on this, I would like to raise two issues. The first is, REFORM FOR WHAT? What is the aim of reform? Is it just to increase the measured rate of GDP growth? Or is it to bring about a transformation in society? My answer is clear. We must REFORM TO TRANSFORM.

The second question is, REFORM FOR WHOM? Who is the target audience? Is our aim to impress groups of experts and score points in intellectual discussions? Or to achieve ranks in some international league table? Again, my answer is clear. Reform is that which helps all citizens, and especially the poor, achieve a better life. It is Sabka Saath, Sabka Vikas.

In short, reform is not an end in itself.  Reform for me,   is just a way station on the long journey to the destination.  The destination is transformation of India.  Therefore, REFORM TO TRANSFORM.  And reforming to transform, is a marathon, not a sprint.

The reforms we have undertaken, are of many types.  For simplicity,  I will classify them  as financial,  structural  and institutional.  It will not be possible for me to cover all of them here. But I will certainly mention some of the most important.

Let me start with the financial reforms.  We talk often about interest rates and credit policy.  Changes in interest rates are debated for months.  Tons of newsprint and hours of television are spent on it.  Interest rates are no doubt very important.  But are they important to a person locked out of the banking system?  To a person who has no prospect of ever lending or borrowing  from a bank?  And if large sections of a country are in this position then how important are interest rates?  It is for this reason that development experts have been advocating financial inclusion.  What we have done in the last 17 months is to bring one hundred and ninety million people into the banking system.  This is more than the population of most of the countries in the world.   Now these millions are part of our banking system, and words  like ‘interest rate’  have a meaning for them.

Not only have these people been brought  into the system  but they 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 Rs. 26,000 crores  or nearly four billion dollars.  Clearly our financial inclusion reform has been transformational.  And yet this quiet revolution has hardly been noticed.  

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 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.  Thanks to Jan Dhan Yojana and the RuPay debit card, we have also  introduced healthy competition  in the debit-credit card  space.  This has traditionally been dominated by a few international players.  Even one year ago, there were hardly any indigenous card brands in the market.  Today, 36 % of debit cards  in India  are Ru-Pay cards.

Financial inclusion is not just about opening bank accounts or enabling electronic payments.  I firmly believe, that India has tremendous entrepreneurial energy.  This needs to be harnessed so that we become a nation of job-creators, rather than job seekers.  When we took office, we found that 58 million non-corporate enterprises provided one 128 million jobs.  60% of them were in rural areas.  Over 40% were owned by people from the Backward Classes  and 15% by Scheduled Castes and Tribes.  But bank credit accounted for  a tiny share  of their financing.  Most of them never get any bank credit.  In other words   the most  employment-intensive  sector  of the economy  gets the least credit!  While Jan Dhan Yojana  was to bring  banking to the unbanked  the second reform  was to bring  funding to the unfunded.  We are creating  a new  financing and regulatory architecture  under the  Micro-Units  Development and Refinance  Agency scheme  popularly known  as MUDRA.  Already  under the Pradhan Mantri Mudra Yojana  banks have provided  More than six million loans  to small businesses  for a total value  of  nearly Rs 38,000 crores  or six billion dollars.  If one conservatively estimates  that each loan  creates 2 jobs  we have laid  the foundation  for 12 million new jobs.  Even Rs Two Hundred Thousand crores  invested in the corporate sector  would not produce  this many jobs.  We have now  launched a programme  where each branch  of each bank  that is  a total  of 125,000 bank branches  will assist  one Dalit or a Scheduled Tribe person and one woman  in starting a business.  We are also creating an environment  that fosters  innovation  and start-ups  through  the Atal Innovation Mission  and the  Self Employment  and Talent Utilisation programme.  

Another financial reform is the provision  of 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.

For many of these reforms to be successful 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.  After the first ever retreat of a Prime Minister with bankers, known as the Gyan Sangam, we have moved decisively to change this.  Major steps have been taken to improve efficiency, including clear performance measures and accountability mechanisms.  We have made a commitment to ensuring adequate capital.

But more than that there have been very powerful  non-financial steps.  Interference   in banking decisions has ended.  A new process for appointments  is being put in place  under the Bank Boards Bureau.  Credible and capable bankers have been appointed  to head banks.  For the first time since banks were nationalised  46 years ago  private sector professionals  have been appointed  in key positions.  This is a major reform.

There is a whole eco-system focused on  alleviating poverty.  Perhaps this can be called  the ‘poverty alleviation industry’.  Obviously   the intentions are good.  Well designed schemes and subsidies do have an important place.  But empowering the poor is far more effective than empowering the poverty alleviation industry.  Our financial reforms empower the poor to fight poverty themselves.   I can take the analogy of a house.  The foundation and basic structure occupies some of the costs. Then come the fixtures, fittings and furniture.  If the foundation and structure are weak  any investment  in nice fittings  or attractive floor tiles  or beautiful curtains is unlikely to last long.  So also, empowering the poor through financial inclusion and social security will provide  a more stable and lasting solution.

Let me now turn to structural reforms in various sectors.  

Agriculture remains India’s mainstay in terms of providing livelihood.   We have introduced a series of reforms.  There was a tendency to divert subsidised fertiliser for the production of chemicals.  A simple but very effective solution is neem-coating of fertiliser which makes it unsuitable for diversion.  This had been tried on a small scale earlier.   We are now moving towards universal neem-coating of urea.  This has already saved crores of rupees of diverted farm subsidies.  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 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 enables farmers to choose the best crop for their soil.  Many farmers have been unaware that their land is actually more suited for a different crop.  In economic terms, it is a win-win-win-win.   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.  They will be tested through a nationwide network of  nearly 1500 laboratories.  About four million samples have already been collected.  This too is a reform to transform.

We have launched a housing for all program - one of the most ambitious in the world.  It involves building twenty million urban houses and thirty million rural houses, totalling nearly fifty million.  The programme will make sure no Indian is houseless.  It will also generate a large amount of employment mainly for the unskilled the semi-skilled  and the poor.  This multi-pronged program is also a transformative reform.

Much has been said  and written  about India’s labour markets.  We have already  undertaken some important steps.  Many workers  in the organised sector  have suffered  when changing jobs  by being unable to access  provident fund  and other benefits.  The benefits  accrued  under one employer  become difficult  to account for  under another employer.  We have introduced  a Universal Account Number  which will remain  with an employee  even when he changes jobs.  This  greatly improves  labour mobility  and makes life easier  for employers and employees.

We have gone  a step further  We have started  empowering  the unorganised sector employees  by giving them  a Universal Identity Number  and providing  certain minimum  social security benefits  to them.  Over a period of years,  this will have  a major impact  on the quality of employment  in India.

Before becoming Prime Minister, I had received  many inputs  about the reforms  needed in India  from many economic experts.  However,  none of them  touched on the issue  of cleanliness and sanitation.  Sanitation has languished  for years  as a poor cousin  of health  or of drinking water supply.  It has often  been viewed as a question  of budgets and projects  and expenditure.  Yet,  you will all agree  that poor sanitation  and lack of cleanliness  is much more  than an issue  of health.  It touches upon  every aspect  of our well-being.  It is  of particular importance  to women.  Our Swacch Bharat  or Clean India campaign  will impact  not only health and sanitation   but also uplift  the status and security of women  and above all  create a powerful sense  of well-being.  If this reform succeeds, as I am confident it will,  India would have been transformed.

We have undertaken  major managerial improvements  in the transport sector.  Our major ports  have seen a 5% growth  in traffic  and an 11% increase  in operating income  in 2014-15  despite a global contraction  in trade volume.  The Shipping Corporation of India  had been making losses  continuously for several years  and had a loss  of Rs. 275 crores  in 2013-14.  In 2014-15  it earned a profit  of Rs 201 crores   a turnaround  of nearly Rs 500 crores  in one year.  The pace of award  of new highway works  has increased  from 5.2 km per day  in 2012-13  and 8.7 km per day  in 2013-14  to 23.4 km per day  currently.  These managerial reforms  in the working  of the public sector  will have large multiplier effects  throughout the economy.

Another measure we have taken  is to identify  what can be called  ‘dead money’  and use it productively.  The best example is gold.  India is well known for its cultural affinity for gold.  As economists you will probably understand that this so-called cultural affinity  has a strong economic logic.  India has often witnessed high inflation.  Gold  is an excellent hedge  against inflation  and is a highly portable  store of value.  Its portability and usability,  also make it  a source of empowerment of women  who traditionally  are the main owners of gold jewellery.  However, this micro-economic virtue,  can become a macro-economic vice.  It implies a high level of gold imports.  We have just launched a series of gold-related schemes.  These will provide Indians with the inflation protection  of gold  along with a modest interest  without actually holding it.  If the scheme reaches its potential, it will help meet  the rational expectations  of the public  while moderating imports.  Surely, this too is an important reform  with potential to transform.

Let me now turn  to institutional  and governance reforms.

For years,  the Planning Commission  was widely criticised.  It was generally seen as a cumbersome  centralising force  which imposed  central will  on the states.  It is another matter that some of its  strongest critics  suddenly developed  a nostalgic admiration  for the institution  they had hated till the previous day.  After coming to power we created a new institution, the National Institution for Transforming India, or NITI.  My vision of NITI  is very different  from the Planning Commission.  It is to be  a collaborative forum  for ideas and action  where States  are full partners  and where Centre and States  meet in a spirit  of co-operative federalism.  Perhaps some people thought this was merely a slogan. But we already have  concrete examples of its transformative power.  Let me explain.

As you all know, the 14th Finance Commission  recommended  that states be given  an enhanced share  of Central revenues  as automatic devolution.  Despite  some internal advice to the contrary,  I decided  to accept the recommendation.  This has created  a need to restructure  Centrally Sponsored Schemes.  Ever since the First Five Year Plan  in 1952,  such decisions were taken  unilaterally by the Centre.  We did something very different.  The task of fixing  the sharing pattern  of Central schemes  was entrusted  not to a group of Central ministers  but to a Sub-Group of Chief Ministers in NITI.  And I am delighted  to say, that  in a fine example of co-operative federalism at its best,  the Chief Ministers  have unanimously agreed  on a set of recommendations.  This  is despite the fact  that this is a very complex issue,  and that  they come from many different political parties.   I received their report, on 27th October.   The main recommendation  on the sharing pattern  was accepted the very same day  and written instructions  were issued  the very next day.  On many other issues too, the Chief Ministers are taking the lead in setting the national agenda.  By reforming the institution, we have transformed the relationship.

Our work  on ‘Make in India’  and ‘Ease of Doing Business’  is of course  well known.  Our push  to ‘Make in India’  must be viewed  in the context of the very slow growth  in world trade.   The growth rate of trade  exceeded GDP growth  from 1983 to 2008.   Since then,  trade has been growing  more slowly than GDP. Therefore,  producing for domestic consumption  is important for growth.

You are all probably aware,  that India  has substantially improved  its ranking   in the World Bank’s  Doing Business survey.  But a new feature,  is the very healthy and constructive competition  among states.  You would be surprised to know, that among the top few states  are Jharkhand,  Chattisgarh  and Odisha.   This is an example of constructive competitive federalism.

In a break with over sixty-five years of tradition  we have involved states  even in foreign policy.  The Ministry of External Affairs   has been asked  to work with the States.  When I visited China,  a state-to-state summit  was also held.  And states  have been asked  to create export promotion councils.  Making the States  think globally  is yet another reform  with potential to transform.

I firmly believe  that India’s people  are far more mature  and far more public-spirited  than arm-chair critics and experts  give them credit for.  An important governance issue   is the mutual trust   between citizens  and the state.  We made a beginning  in trusting the citizens  by abolishing  many requirements  for ‘attestation’ of signatures.   For example,  the Department of Higher Education,   has permitted self attestation  by students   of documents used for admission    in various academic courses.  We also ended the requirement  to visit government offices  for life certification for pensioners  by introducing online biometric identification.  Economists have traditionally believed    that people act in their self interest.    But India has a long tradition of voluntarism.    We introduced    the Give-it-up Campaign seeking the cooperation  of the public  in voluntarily giving up  cooking gas subsidies.   We promised them   that for every connection given up one poor family  currently without gas  would be given a connection. This will enable us to liberate many poor women   from the health hazards  of using firewood  including respiratory illness.  The response has been tremendous. Within a few months   over four million Indians have given up their cooking gas subsidies.   Most of them are not rich households and belong to the lower middle class.  If any of you in this room  still have a subsidised connection   let me appeal to you  to join them.   

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. Another major reform   is well known.  This is the removal of discretion in allocation of key resources.  Our auctions of coal spectrum and FM radio licences have produced major additional revenues. In the case of coal the major beneficiaries are some of India’s poorest states, who will now have much more resources for development. Interviews for lower level government jobs have widely been seen, as a source of corruption.  We have recently abolished the system of interviews for lower level posts in government. We will rely on transparent written examination results to decide who will be selected. Our campaign against tax evasion and money laundering is also well known.  Rs. 6500 crores has been assessed before the new Black Money Act was implemented.  Additionally, over Rs 4000 crores   has been declared  under the new Act.   Thus over Rs 10,500 crores of black money from abroad   has been detected and assessed.  If we can sustain this improvement in integrity and transparency what can be  a more transformative reform?

We are also taking several steps to serve the honest taxpayer better.   Electronic filing of returns now covers 85% of all tax returns.   Earlier, electronic returns had to be followed  by a paper verification  which used to take weeks  to be processed.  This year, we have introduced e-verification using Aadhaar  and over four million taxpayers  made use of this facility.  For them, the entire process was simple, electronic  and completed instantly with no paper at all.  This year, 91% of electronic returns were processed within ninety days as compared to 46% last year. Nearly 90% of refunds were issued within 90 days.   I have asked the Income Tax Department to move to a system where not only returns but also scrutiny is done without having to go to the office.  Queries could be raised and answered online or by Email.   There should be a visible electronic trail of what is pending with whom, where, and for how long.  This is being piloted in five big cities.   I have also instructed that the performance appraisal system, for Income Tax Officers be changed.  The appraisal should reflect, whether or not the officer’s orders and assessments have been upheld on appeal.   This will deter corruption and also motivate officers to pass correct orders.   When fully implemented, these changes, namely online scrutiny,  and changes in performance appraisal have transformative potential.

This is a distinguished gathering. You have many interesting and thought provoking sessions ahead.  My appeal to all of you, is to think beyond conventional remedies. We should not limit our idea of reforms to a few standard notions.   Our idea of reforms should be inclusive and broad-based.  The goal of reforms is not better headlines in the pink papers, but better lives for our people.   I am sure you with your knowledge will come up with even better ideas.   I look forward to hearing from you of more  ‘reforms to transform’  which will make life better  for the whole of India.  Then not only we in India  but the whole world  will benefit.  

Thank you.

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