PM addresses the nation
on recent reforms: Full text of the speech
Indian Prime Minister, Dr. Manmohan
Singh addressed the nation on Friday to explain the need of the recently
announced economic reforms. Soon after announcing a bold 12 per cent hike in
diesel prices, the government introduced new FDI guidelines in sectors like
aviation, retail and broadcasting, a move that is expected to attract fresh
investment into these sectors.
"My dear brothers and
sisters,
I am speaking to you
tonight to explain the reasons for some important economic policy decisions the
government has recently taken. Some political parties have opposed them. You
have a right to know the truth about why we have taken these decisions.
No government likes to
impose burdens on the common man. Our Government has been voted to office twice
to protect the interests of the aam aadmi.
At the same time, it is
the responsibility of the government to defend the national interest, and
protect the long term future of our people. This means that we must ensure that
the economy grows rapidly, and that this generates enough productive jobs for
the youth of our country. Rapid growth is also necessary to raise the revenues
we need to finance our programmes in education, health care, housing and rural
employment.
The challenge is that we
have to do this at a time when the world economy is experiencing great
difficulty. The United States and Europe are struggling to deal with an
economic slowdown and financial crisis. Even China is slowing down.
We too have been affected,
though I believe we have been able to limit the effect of the global crisis.
We are at a point where we
can reverse the slowdown in our growth. We need a revival in investor
confidence domestically and globally. The decisions we have taken recently are
necessary for this purpose.
Let me begin with the rise
in diesel prices and the cap on LPG cylinders.
We import almost 80% of
our oil, and oil prices in the world market have increased sharply in the past
four years. We did not pass on most of this price rise to you, so that we could
protect you from hardship to the maximum extent possible.
As a result, the subsidy
on petroleum products has grown enormously. It was Rs. 1 lakh 40 thousand crore
last year. If we had not acted, it would have been over Rs. 200,000 crore this
year.
Where would the money for
this have come from? Money does not grow on trees. If we had not acted, it
would have meant a higher fiscal deficit, that is, an unsustainable increase in
government expenditure vis-a-vis government income. If unchecked, this would
lead to a further steep rise in prices and a loss of confidence in our economy.
The prices of essential commodities would rise faster. Both domestic as well as
foreign investors would be reluctant to invest in our economy. Interest rates
would rise. Our companies would not be able to borrow abroad. Unemployment
would increase.
The last time we faced
this problem was in 1991. Nobody was willing to lend us even small amounts of
money then. We came out of that crisis by taking strong, resolute steps. You
can see the positive results of those steps. We are not in that situation
today, but we must act before people lose confidence in our economy.
I know what happened in
1991 and I would be failing in my duty as Prime Minister of this great country
if I did not take strong preventive action.
The world is not kind to
those who do not tackle their own problems. Many European countries are in this
position today. They cannot pay their bills and are looking to others for help.
They have to cut wages or pensions to satisfy potential lenders.
I am determined to see
that India will not be pushed into that situation. But I can succeed only if I
can persuade you to understand why we had to act.
We raised the price of
diesel by just Rs. 5 per litre instead of the Rs 17 that was needed to cut all
losses on diesel. Much of diesel is used by big cars and SUVs owned by the rich
and by factories and businesses. Should government run large fiscal deficits to
subsidise them?
We reduced taxes on petrol
by Rs. 5 per litre to prevent a rise in petrol prices. We did this so that the
crore of middle class people who drive scooters and motorcycles are not hit further.
On LPG, we put a cap of 6
subsidised cylinders per year. Almost half of our people, who need our help the
most, actually use only 6 cylinders or less. We have ensured they are not
affected. Others will still get 6 subsidised cylinders, but they must pay a
higher price for more.
We did not touch the price
of kerosene which is consumed by the poor.
My Dear Brothers and
Sisters,
You should know that even
after the price increase, the prices of diesel and LPG in India are lower than
those in Bangladesh, Nepal, Sri Lanka and Pakistan.
The total subsidy on
petroleum products will still be Rs. 160 thousand crore. This is more than what
we spend on Health and Education together. We held back from raising prices
further because I hoped that oil prices would decline.
Let me now turn to the
decision to allow foreign investment in retail trade. Some think it will hurt
small traders. This is not true.
Organised, modern
retailing is already present in our country and is growing. All our major
cities have large retail chains. Our national capital, Delhi, has many new
shopping centres. But it has also seen a three-fold increase in small shops in
recent years.
In a growing economy,
there is enough space for big and small to grow. The fear that small retailers
will be wiped out is completely baseless.
We should also remember
that the opening of organised retail to foreign investment will benefit our
farmers. According to the regulations we have introduced, those who bring FDI
have to invest 50% of their money in building new warehouses, cold-storages,
and modern transport systems. This will help to ensure that a third of our
fruits and vegetables, which at present are wasted because of storage and
transit losses, actually reach the consumer. Wastage will go down; prices paid
to farmers will go up; and prices paid by consumers will go down.
The growth of organised
retail will also create millions of good quality new jobs.
We recognise that some
political parties are opposed to this step. That is why State governments have
been allowed to decide whether foreign investment in retail can come into their
state. But one state should not stop another state from seeking a better life
for its farmers, for its youth and for its consumers.
In 1991, when we opened
India to foreign investment in manufacturing, many were worried. But today,
Indian companies are competing effectively both at home and abroad, and they
are investing around the world. More importantly, foreign companies are
creating jobs for our youth -- in Information Technology, in steel, and in the
auto industry. I am sure this will happen in retail trade as well.
My Dear Brothers and
Sisters,
The UPA Government is the
government of the aam aadmi.
In the past 8 years our
economy has grown at a record annual rate of 8.2 per cent. We have ensured that
poverty has declined much faster, agriculture has grown faster, and rural
consumption per person has also grown faster.
We need to do more, and we
will do more. But to achieve inclusiveness we need more growth. And we must
avoid high fiscal deficits which cause a loss of confidence in our economy.
I promise you that I will
do everything necessary to put our country back on the path of high and
inclusive growth. But I need your support. Please do not be misled by those who
want to confuse you by spreading fear and false information. The same tactics
were adopted in 1991. They did not succeed then. They will not succeed now. I
have full faith in the wisdom of the people of India.
We have much to do to
protect the interests of our nation, and we must do it now. At times, we need
to say "No" to the easy option and say "Yes" to the more
difficult one. This happens to be one such occasion. The time has come for hard
decisions. For this I need your trust, your understanding, and your
cooperation.
As Prime Minister of this
great country, I ask each one of you to strengthen my hands so that we can take
our country forward and build a better and more prosperous future for ourselves
and for the generations to come.
Jai Hind."
