Opening Remarks by
Shri L.K. Advani
Leader of the Opposition (Lok Sabha)
At an Interaction with
Representatives of Indian Business
New Delhi – November 20, 2008
I extend a hearty welcome to all of you. I thank you for having accepted my invitation to meet with me and my colleagues today and to share your ideas on the current economic crisis in the country. Today’s interaction with representatives of business is the first of a series of consultations that I have decided to have with representatives of different sectors of the economy such as agriculture, labour, small-scale industry, traders and consumers.
In the run-up to the forthcoming parliamentary elections, my party and my alliance have already begun efforts to prepare an agenda for Good Governance, Development and Security. The purpose of today’s consultation, as also of similar consultations to follow, is to benefit from your views on how to overcome the current economic crisis.
Friends, it is evident that no segment of the economy and no section of our society has remained untouched by the worsening economic situation. The crisis could assume the proportions of an economic emergency unless it is handled with determination, clarity of thought, and creative new approaches. The global economic meltdown no doubt provides the external context to this crisis. However, it would be an act of escapism to attribute the severe slowdown in the Indian economy, solely or even mainly to the global recession.
The current economic crisis has instilled uncertainty, insecurity and even fear among all sections of society, most of all among the poor and the middle classes. Until sometime back, they were mainly worried by the steep rise in the prices of essential commodities and services. Now, in addition to price rise, they are also faced with the loss of livelihood. While pink slips in high-profile jobs attract a lot of media attention, loss of livelihood in the unorganized sector hardly attracts attention. Nevertheless, it is a fact that lakhs of people have lost employment in the construction industry, small-scale industry, transportation and other services, and informal sectors of the economy. The survey conducted by India Today last week suggests massive lay offs both in the export sector and other major segments of the economy. Unemployment in a country where our population is predominantly young is a problem with serious social consequences.
The GDP growth has plummeted with a grim outlook for the next year. All sectors of the economy, manufacturing, real estate, automobiles, steel, construction sector, civil aviation, hospitality, tourism are in deep trouble.
I am concerned most about how the economic slowdown is affecting the poor. During my travels all across the country, when I see that work has stopped on half-complete construction projects, my heart goes out to the poor construction workers who have lost their jobs. Most of them are migrant workers, who have come from poorer parts of the country where there are few sources of livelihood. They cannot go back to their villages. And they have lost even their temporary jobs in cities.
This is not a scenario only limited to the poor. People in all segments of the economic spectrum have seen a dip in their wages and incomes. Even those who have a fairly secure job today are worried about tomorrow.
When prices go up and incomes come down, people tend to cut down on expenditure, even on essential items. This has a cascading effect. It is not only that airlines are flying less-than-full planes and canceling flights, but even autowallahs and rickshaw-pullers in towns and cities are getting less passengers. And their numbers runs into millions. When auto-drivers earn less, they send less money to their families in rural India, where many families still depend on what is called the money-order economy.
Therefore, even though I am concerned about the health of our airlines, I am more concerned about the economic wellbeing of our auto drivers and rickshaw-pullers.
Similarly, when I read that IT companies have halted fresh recruitment or asked their existing employees to go on a one-year sabbatical with reduced salary, I am not only concerned about the companies and their staff, but also about those working in nearby tea-shops and stationery stores who are far more vulnerable.
The point I wish to make is that a nation’s economy is like its eco-system. If there is a fire in the forest, it not only burns the trees but also endangers birds, insects and micro-organisms. Therefore, we must quickly put down this fire called the economic crisis.
But what is required is more than a fire-fighting approach. There is an urgent need to deal with the economic crisis with a systemic approach, by going to its roots. This realization is now dawning on forward-looking people all over the world. There is already a massive change in the global opinion on the type of economic and financial model suitable to the world as a whole and also to different nations, particularly in the context of the experience of the last 15-20 years after the end of the Cold War.
The global financial crisis, which has its roots in the US financial crisis, seems to go to the very root of the Western world’s failed economic model that it was asking others to follow. The manner in which the unreal or virtual economy destroyed the real economy in the West is a clear warning to India. India cannot attain prosperity by boosting speculative instincts. A country cannot rise as a global economic power if its farmers commit suicide in thousands. This has to stop. Real and enduring prosperity can come only by developing the real economy ? agriculture; industry (small, medium and big); banking and financial sector; manufacturing; services; informal sector, etc ? in an integrated manner, by taking care of the needs of everybody and everything in our economic and social eco-system.
Friends, the process of recovery from the current economic crisis and thereafter a major reconstruction of the economy is certainly going to be a long haul. Therefore, India needs to address both short-term and longer-term tasks. I would like to hear your views on both.
I have no doubt that India is capable of succeeding both in overcoming the current crisis and, indeed, in turning it into a major opportunity for a giant leap forward. However, we can call this transformation a success only if poverty is eliminated, agriculture and the rural economy are rejuvenated, and our sisters and brothers belonging to the Scheduled Castes, Tribes and other weaker sections of society are economically empowered to enjoy the fruits of equal opportunities. The Bharatiya Janata Party and the National Democratic Alliance are fully committed to contributing to this success.
An eminent newspaper editor recently asked me in Chennai: “If the NDA gets an opportunity to form the next government at the Centre after the forthcoming parliamentary elections, what will be your first priority?”
The answer I gave him is what I would like to reiterate today. “Shri Atal Bihari Vajpayee’s government had instilled hope and confidence in the country by taking many bold steps during its six years in office. In contrast, there is all-pervasive insecurity, uncertainty and despair in the country today. Therefore, the first priority of a future NDA government will be to remove the atmosphere of insecurity and pessimism and to bring back hope and confidence.”
This is the assurance I wish to give to Indian industry and business. This is also the assurance I wish to give to all other segments of the economy, whose representatives I shall soon be calling for similar consultations. I seek ideas and suggestions from one and all. So this is the spirit in which I have troubled all of you to come today. I am grateful to you for your participation.
MEETING WITH BUSINESS LEADERS
This evening Shri Advani met with some of India’s top business leaders to discuss the state of the Indian and global economy. This meeting is the first in a series of consultations that Shri Advani plans to have with various groups on economic matters. Other groups to be consulted in the coming days include agriculturists, trade unions, global business leaders, and representatives from the small and medium industries.
In his opening remarks (which have also been circulated), Shri Advani welcomed the business leaders and invited their views on the current economic crisis. He emphasised that he was seeking their comments and suggestions to help formulate the NDA’s agenda for Good Governance, Development, and Security. He added that he was deeply concerned that the economic slowdown was creating insecurity and fear among the poor and the middle classes. Shri Advani stressed that in the West unchecked speculation had led to the virtual economy seriously damaging the real economy. Real and enduring prosperity in India could only come from developing the real economy — agriculture, small and large industry, the financial sector, manufacturing, services, informal sector, etc. — in an integrated manner. Shri Advani reminded participants that Shri Vajpayee’s government had instilled hope and confidence by taking many bold steps. The first priority of a future NDA government would be to similarly remove insecurity and fear and bring back hope and confidence.
During the two hour long meeting, each business leader spoke on the challenges and opportunities facing their companies and the overall economy. First, all participants felt that the Indian economy was already at serious risk and that the economic situation was worsening rapidly. An aggressive policy framework is necessary to avoid a dramatic crash-landing for the economy. All participants agreed that adequate and affordable credit is urgently required to overcome a massive credit crunch. While this credit crunch is painful for large companies, it is likely to be disastrous for agriculture, smaller companies, and consumers. Foreign exchange inflows must be encouraged just now to bolster the Rupee since the important Rs. 50/$ barrier has been breached.
There was serious concern about large-scale job losses in various important sectors such as construction, textile, automotive ancillaries, and other export industries. Since several other large exporting countries were moving aggressively to encourage exports, India had to carefully analyze which industries were facing dumping actions and prevent this by using the full force of anti-dumping provisions. Participants had mixed views on new fiscal stimulus given the government’s existing deficits. There was broad agreement that existing projects needed to be expedited and that approved loans should be disbursed as quickly as possible.
Several longer term priorities emerged during the discussion and will be considered carefully in formulating the NDA’s economic agenda. These included:
1. Establishing an equitable growth model for all Indian citizens that will guarantee economic security and employment. Every Indian should have adequate nutrition, health care, access to education and credit. There is an urgent need to use employment generation as the overriding performance metric for the economy given that 15 million young people join the workforce every year.
2. Strengthening agriculture across India and improving farmers’ economic livelihoods through remunerative prices, right decisions on crop management, the best agricultural technology, adequate water supplies, clear property rights, and the necessary rural infrastructure that will allow them to operate as efficiently as possible.
3. Ensuring quality education and health care for all Indians. Both these sectors can benefit from public-private partnerships which can help in improving quality, providing specialised services, and developing new technologies. Moreover, access to higher education needs to be vastly expanded for all students. Expanded access is crucial for training more teachers, professors, and health care professionals. With the right policies, India can create a highly educated workforce at home and be an educator to the world.
4. Developing infrastructure on a war footing. Highways, power plants, transportation systems, irrigation projects (including medium and small projects), railway tracks, ports, all these are absolutely essential for rapid growth. The right regulatory frameworks, fair and honest bidding, single window clearance, and adequate investment returns in each of these sectors are necessary to accelerate infrastructure development.
5. Securing India’s energy independence by taking full advantage of our hydrocarbon and renewable resources. India’s energy requirements will also require accelerated development of our gas and electricity grids. Green technologies are likely to be a major growth area, and India has the technological resources to be a global leader in this industry.
6. Revitalizing cities and putting them on a sustainable economic footing. Within the next 20 years, 45% of India will live in urban areas, which will require major new urban infrastructure. Local accountability needs to be strengthened and sensible public-private partnerships have to be developed to deliver urban services. Along with fixing our existing cities, many new cities will have to be developed, as is being done in Chattisgarh and Gujarat.
7. Further reforming the financial sector but in a manner which will not expose it to undue domestic or global risks. There is a need to dramatically improve financial inclusion, meet the targets of priority sector lending (particularly infrastructure), mobilise private capital and to have world-class regulation. Additionally, the entire financial system might need to be recapitalized aggressively to support growth.
8. Ensuring access to the best private sector R&D and skills is critical for defense production. Therefore, government requirements and plans need to be as transparent as possible. Contracts should then be awarded with long-term orientation so that the private sector can make the necessary investments.
Shri Advani concluded by reiterating the NDA’s commitment to economic security, job creation, and a fast-growing economy. Lastly, he noted that the global economic crisis was an opportunity for India to further enhance its position in the global economy.
Source: Forward E-mail