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The Rediff Business Special/ Manmohan Singh

'We must make full use of the international economic system, rather than withdraw ourselves from the rest of the world'

The celebration of the golden jubilee of our Republic is an occasion for introspection and to set new goals for our nation. When I look at India before Independence -- the 50 years before Independence -- and the 50 years that came after 1947, I find that in every sphere of life there has been progress. Between 1860 and 1909 there were 22 famines in this country, that is, one famine every two and a half years. After 1910, the British government found some way to deal with these problems. At least 3 million people died in the Bengal famine.

We take pride in the fact that with the system of food security, the stimulus that we have given to agriculture in our country, we have been able to avoid that sort of catastrophe. In the 1960s, according to credible international estimates, at least 30 million people perished in the famine in China in the wake of the Great Leap Forward. We have escaped from that sort of calamity. That is a tribute to the vision of the founding fathers of our Republic.

Before Independence, India had a literacy rate of less than 16 per cent. I agree, we should have done more, but even then the increase from 16 to 53 per cent, as revealed by the national census of 1991, is a substantial step forward. Infant mortality rate in our country in the 1940s was between 145 and 150 per thousand births. We brought it down to 70. It is not good enough, but there is progress. In 1947, India did not have a capital goods industry worth the name. Today, India can meet 80 per cent to 85 per cent of its requirement of capital goods through domestic production. Dr Ashok Mitra referred to the need for self-reliance. We are entirely one with him. There is no alternative for this country but to pursue a path of maximum possible self-reliance. But what is this self-reliance?

Jawaharlal Nehru wrote in the first chapter of the Third Five Year Plan: 'The only viable meaning of self-reliance in an increasingly interdependent world is that we should be able to pave way in our international transactions through our exports and normal inflow of capital, that we should do away with reliance on official aid which is never free of strings.' If the criterion is like that, India today is more self-sufficient than ever before.

In recent years, India is able to meet 85 to 90 per cent of important requirements through its own export efforts. As regards the reliance on concessional aid, until a few years ago the average was not 1.5 per cent, probably 3. In the last five or six years, the reliance on external resources has declined as a proportion of our national income. It has not gone up.

Our pace of progress, although it falls short of the aspirations of our people, although it does not compare favourably with many countries of East Asia and South East Asia, is good. The fact is that if this pace of social and economic transformation has been sustained in the framework of an open society, a democratic polity, committed to the rule of law, it is a matter of pride for all Indians. Self-reliance must remain the cardinal principle of our economic and social polices. But it has to interpreted in a dynamic world.

Our party, being faithful to Rajiv Gandhi's mandate, made efforts to realise his vision. I am not saying that all the things which we did were right. There were mistakes. But the motive, the inspiration, was not to sell India to foreigners but build an India which can enter into the 21st century with self-confidence and self-reliance. We cannot realise our destiny unless we make full use of modern science and technology. We must take advantage of our vast reservoir of scientific, managerial and technological skill and go forward and look the world straight in the face.

India is on the threshold of great opportunities. The WTO is not going to subvert India's sovereignty. No country can subvert the sovereignty of a country of 900 million people with its Parliament being alert, media being alert and public opinion being such a force. We will always remain master of our destiny. But if we do not take note of changes taking place and the tremendous progress that technology is making all over the world, if our enterprises are condemned to second rate and third rate technology, the people of India are not going to accept that.

The people of India want our industry to produce quality goods to compete with multinationals not only within our own country but also abroad. India can do it. And it is the duty of this Parliament, to strengthen our enterprise, our scientists and our farmers to meet that challenge. But if you believe you can isolate yourself from the rest of the world -- I think we made that mistake in the 17th and 18th and 19th centuries when the rest of the world was showing great industrial revolution. That is why both India and China were left behind in the race for social and economic growth. -- if today we make that mistake, history will never forgive us.

I have dealt with the World Bank and IMF for nearly 30 years. I can with absolute truth, from my own experience, say that we have made use of these institutions. They have not been able to dictate to us things which we did not want to do. A new historian of the World Bank is going to bring out how the World Bank thinking about development matters was influenced by innovation made in this country. We need strong growth because without that you cannot solve the problem of poverty or unemployment.

Growth capabilities are unequally distributed in our country. Therefore, those who are at the lower end of the ladder, social and economic ladder these sections of society -- SC/STs, OBCs, women and children -- requires special attention. That is why we need special programmes to help the disadvantaged sections and regions.

It is quite possible that some of these programmes have not been implemented as effectively as it should have been. We have had too much centralisation. We did not pursue that goal of panchayati raj with the determination that we ought to have shown. Fortunately, the amendments carried out in the Constitution have bridged that gap. Therefore, all the pressure that this House can bring to bear on other segments of our society should be to strengthen the role of panchayati raj institutions. That is the legitimate pursuit of decentralisation. Educational programmes, health programmes, should be designed with an eye on local requirements, potentialities and local resource mobilisation efforts.

India's economy is so big that it cannot be governed efficiently and effectively by the government alone. Corruption is a subject which you talked of. You cannot get rid of corruption by having an excessively over-bureaucratised state machinery. In all these matters, there is a need for fresh thinking and a national consensus.

As I see, India today faces four crises. The first is the fiscal crisis. The challenge before our country is to correct the fiscal imbalance without hurting public sector investment. We need public sector investment in agriculture and infrastructure. But for many years to come, the government responsibility for infrastructure improvement will remain predominant. And if you do not deal with the fiscal malaise, if your are going to allow the subsidies, however desirable, they may proliferate. Then we cannot solve this problem.

State Electricity Boards are today losing Rs 80 billion annually. If SEBs had these Rs 80 billion with a debt-equity ratio of, let us say, 1:2, your could mobilise from the market and additional sum of Rs 160 billion. The annual additional resources at the disposal of SEBs would be about Rs 240 billion. With this amount you can add at least 6,000 mw of power per annum.

You would not need any foreign investment if our SEBs are run according to the laws which say that SEBs must so conduct their operations that they earn a minimum rate of 3 per cent on their fixed investment. But this law has been violated. How long can this country live with such violations? Parliament formulates laws. But these laws are honoured more in their breach than in observance. It is time that this House did something about this.

The public sector will continue to play the important role in our national development. In all economies, profits have been the biggest source of investment and income distribution. If your socialise profits through the public sector, you kill two birds with one stone.

The second crisis is the infrastructure crisis. This is not going to disappear by giving counter-guarantees. Which private sector will invest in power if your SEBs are bankrupt? All these are absorbed, sooner or later, into the public sector deficit. If you therefore, take up the problem of infrastructural development seriously, then structural reforms in the power sector, telecom sector and others, are essential so that all investors will have an assurance that they will get a reasonable rate of return.

The third crisis is the human resource crisis. It is a shame that 50 years after our Independence, not all our children are in schools. We must make good that deficiency in the next five years. We must bring down the rate of population growth to what has been achieved in Kerala and more recently in Tamil Nadu. We need a comprehensive social development strategy which consists of credible social safety nets.

Fourthly, we need a modern financial system in our country. Our banking system is not up to the mark. Our banking sectors, capital markets and insurance need reform. Our ambition should be to become an additional pole for the world. We have not to be afraid of those who wish to dominate. International relations have never been a game of charity. They have always been and they will always be a game of power relations.

In the multipolar world that is now arising -- there is Japan, the European Union and North America -- there are opportunities. We must make full use of the international economic system, rather than withdraw ourselves from the rest of the world. These are the challenges and I think India has all the ingredients to get rid of the scourge of poverty, ignorance and disease in the next 15 years and to emerge as the third or the fourth largest economy in the world. And, at the same time, be a compassionate, humane society, proud of its liberal democratic heritage.

Dr Manmohan Singh was the finance minister from 1991 to 1996 in the Congress government. This speech was delivered during the special session of Parliament.