FM’s speech at the Norwegian Nobel Institute, Oslo
	15:50 IST

Following is the text of the speech of Finance Minister, Shri P. Chidambaram at the Norwegian Nobel Institute, Oslo on ‘India’s Socio Economic Agenda: Development with Democracy’ delivered in Norway today:- “I am grateful to the Norwegian Institute of International Affairs and the Nobel Institute, Oslo for inviting me to speak to a distinguished audience of scholars, researchers and representatives of civil society. I am particularly honoured to be speaking here so soon after the Nobel Institute conferred its award upon a United Nations’ committee headed by a fellow Indian, Dr R.K. Pachouri. Over the years, by the award of the Nobel Prize, you have encouraged individuals and organizations to work for the cause of peace and international understanding. I salute the work of the two Institutes, and let me add that without peace and without international understanding there can be neither development nor democracy. In the modern age, development and democracy have often been at odds with each other. When the advanced countries of the world were developing, they did not face the challenges of democracy as we do today, For example, for well over a hundred years, the United States developed into a prosperous country even while it employed slave labour and while it denied political and economic rights to women. There are also contemporary examples of countries that vigorously pursue the goal of development while paying scant attention to the democratic urges of their people. It is, however, gratifying to note that more and more countries are inclined to pursue both goals – development and democracy. India is among these countries. Hence the choice of the subject on which I address you today. Development is a basic urge of all societies. Many countries – especially after they won their independence – adopted different models of development. A favourite was the dirigiste model, and many genuinely democratic leaders adopted that model and put the State in the driver’s seat. It found intellectual support from Fabian socialists to Keynesian economists and from Gandhian workers to Marxist ideologues. India too chose that economic model. At the same time, India chose the political model of democracy. India was not unique in this respect. Many newly independent countries were attracted to democratic socialism. It was an experiment that was watched with great interest by the other countries of the world. Initially, there was a promise of success. However, as one democratic socialist State after another failed, the leaders turned on democracy and blamed democracy for their failure on the economic front! India was a rare exception. India plodded along on the path of democracy and kept faith with the socialist model. That faith took India’s rate of growth to 3.5 per cent a year, but that was not enough to make a dent on poverty. After 30 years, at the end of 1977-78, 51 per cent of the Indian people were characterised as extremely poor. The first winds of change began to blow in the 1980s and the moment of decision came in 1991. Faced with the threat of bankruptcy, India made a paradigm shift, and the India story began in June 1991. The India growth story has been told and retold many times and all of you are familiar with that story. Allow me, however, to narrate some highlights of that story and bring you to the present day. GDP at market prices has increased from US$ 20 billion in 1950-51 to US$ 912 billion in 2006-07 and is expected to cross a trillion dollars in the current year. In terms of purchasing power parity, India’s GDP at US$ 4 trillion in 2006-07 accounted for 6.3 per cent of global GDP. Average annual economic growth, which had been constant and tardy at 3.5 per cent during the first thirty years of Independence, increased to 5.7 per cent during the 1990s and, since 2003-04, the average rate has increased further to 8.6 per cent. 2006-07, in particular, was a splendid year with the GDP growing at 9.4 per cent. This growth has not been jobless growth. During 1999-2000 to 2004-05, India added to its workforce about 12 million people each year. During this period, the rate of growth of employment was 2.9 per cent per year. India, after China, is the fastest growing economy of the world, and together with Brazil, Russia and China is the locomotive driving world growth. The India growth story is a development story. It is also a story that is founded on its democratic roots. Here, I use the word ‘development’ as a form of shorthand – a code – to capture the essence of economic progress: high savings, robust investment, fiscal prudence, moderate and stable taxes, creation of jobs, productivity gains, progress in human development indicators and contribution to global economic stability. I also use the word ‘democracy’ as a code to describe the values of a democratic society: rule of law, equality, voice and representation, inclusiveness, equity and social justice. Sometimes, the development goals may come into conflict – or may appear to be in conflict – with the democratic values. At those times, there is a temptation to put growth against equity, savings against consumption, investment against current expenditure, and economic prosperity against inclusiveness. We do not yield to such temptation and we reject the argument of conflict between the goals of development and the values of democracy. I would like to draw your attention to the manner in which the economic reforms were – and are -- undertaken in India. It was an elected government that was weak, incompetent and indecisive that pushed India into near-bankruptcy. Elections were held, and it was another elected government that pulled India out of the crisis through a series of wise and courageous decisions. At every step, we observed the rules of parliamentary democracy. In quick succession, the government placed before Parliament a path-breaking and reformist budget, the new industrial policy and the new trade policy. Every change that required legislative authority was made only after an appropriate law was passed by Parliament. I can cite the examples of the important changes made in the legislations governing industrial policy, trade policy, companies, monopolies and foreign exchange. Piloting a reform through Parliament is more than piloting a legislation. While Parliament scrutinizes the new law, there is also scrutiny by State governments that guard their rights zealously, by scholars and academics, by the media, by vested interests and beneficiaries, and by representatives of civil society. It is because we went through the participative and consultative processes that the most difficult economic reforms have proved to be credible, durable and most importantly irreversible. Yet, at the present stage of the development process, we realize that we face a number of divides that create pressures and cause tensions in our democratic society. Foremost among these is the divide between the rich and the poor. The questions that haunt us every day are: Are we doing the right thing for the poor? Are those who were left behind in the process of development being brought into the process? Are we doing anything that will further immiserise the poor? Do the poor have the voice and the representation to express their concerns and their expectations? The proportion of people living below the poverty line in India has declined from 51.3 per cent in 1977-78 to about 22 per cent in 2004-05. But in absolute terms they still number around 250 million. More than one third of our 1.1 billion people live on less than one dollar a day. A large proportion lacks access to public goods such as clean drinking water, sanitation, basic health care, electricity and roads. India agreed with the rest of the world to adopt the Millennium Development Goals and through this compact we accepted time bound targets for overcoming poverty and expanding human freedoms. The Millennium Declaration was adopted by 189 nations and signed by 147 Heads of States and Governments. The Declaration emanates from the simple idea that gross disparities of opportunities are not an immutable feature; and are an avoidable and indeed surmountable human situation. The year of reckoning is 2015. The recent mid-term assessment report on the MDGs in the Asia Pacific region released jointly by the UN and the Asian Development Bank notes the remarkable achievements on several fronts made by India. Notably, we are early achievers in reducing the incidence of international scourges like HIV and tuberculosis. Similarly, we have achieved an enrolment ratio of 95 per cent in primary education. Of the children in school, 73 per cent are now reaching Grade V. The report also notes that India has helped in pushing the Asia Pacific region’s overall enrolment rate to 94 per cent. India is also on target on elimination of gender disparity in primary and secondary education. We have managed to provide drinking water to 83 per cent of our rural population and sanitation coverage has gone up in the last decade to 22 per cent from a dismal rate of 3 per cent. While the mid-term report card is indeed mixed, we are happy that the world is taking note of India and other emerging economies. If the developed countries of the world are serious in their intention to achieve the Millennium Development Goals, they must realize that the goals will not be achieved until they are achieved in India and China. That is a sobering thought and casts a heavy responsibility upon the governments of India and China. India has adopted many strategies to reduce the disparities. The mandate of the 11th five year plan is to achieve “faster and more inclusive growth. Development requires resources, democracy demands a wise allocation of resources. Public resources can be augmented, yet they are limited in any country. Private resources must be harnessed to supplement public resources. There are areas where it would be easier to channelize private resources, free public resources, and use such public resources in areas where they would directly benefit the poor. And we are doing precisely that. The manufacturing and services sectors have been thrown open to the private sector and they attract vast quantities of investment. The governments – both at the Centre and the States -- have ploughed their resources into the production of public goods and services such as education and healthcare. In 2003-04 the Central government allocated about Rs 70 billion for healthcare and about Rs 70 billion for education. In the current fiscal we have allocated Rs 143 billion for healthcare and Rs 286 billion for education. The bulk of these amounts is being spent in rural India to build classrooms, appoint teachers, provide a cooked lunch to school children, open primary and secondary health centres, appoint a rural health worker in each village, immunize children against several diseases, and equip schools and hospitals. There can be no development without connectivity and communication. They are, at the same time, private goods as well as public goods. There is, however, a hierarchy: in any democracy, goods used mostly by the poor are the responsibility of governments and, in any development strategy, goods used mostly by the well-to-do should be paid for by the users. Thus, the postal system is run by the Central government in India and many basic postal services are subsidized. Telecommunication services are provided both by government-owned companies and private service providers. The railways remain the responsibility of the government, while roads are built using the public private partnership model. Even here, rural roads that connect the villages are built out of public funds. Housing is another area where we have tried to reconcile the demands of development and democracy. The banking system provides vast amounts of money as loans for houses: at the end of 2006-07, the amount outstanding as housing loans was Rs 2307 billion, and more than Rs 500 billion was given in that year alone . Simultaneously, we have launched a major programme of building houses for the poor. Under ‘Bharat Nirman’ or the ‘Building India’ programme, we have planned to build 6 million houses in a period of four years. Since the programme was launched in 2005-06, we have constructed 3.1 million houses for the poor. Financial inclusion and the availability of credit have traditionally eluded the poor. No development can take place without a strong and sound banking system. India’s banks have strong balance sheets, are well regulated, and have adequate capital and very low nonperforming assets. We are using the banking system to broaden and deepen democracy by requiring that a certain proportion of loans shall be extended to borrowers in priority sectors such as farmers, students and self-help groups. In the process, we have accelerated development in these sectors. Farm loans have more than doubled in three years from Rs 869 billion in 2003-04 to Rs 2032 billion in 2006-07. Loans to students have trebled from Rs 45 billion at the end of March 2004 to Rs 142 billion at the end of March 2007. It is not widely known that India runs the largest micro-finance programme in the world. At the end of August 2007, 2.93 million self-help groups, an overwhelming number comprising women alone, had been provided credit by the banks. The total amount of outstanding credit is Rs 181 billion. In any country, those who spearhead development are at or near the top of the pyramid and those who form the bedrock of democracy are at the bottom. The challenge is to empower those at the bottom of the pyramid and give them the opportunities to move up, even as the pyramid itself moves up the ladder of economic progress and human development. Countries such as Norway have done just that. While some will be rich, even very rich, there is no iron law that says that any section of the population shall remain poor forever. As the Indian economy grows and draws more people into the development process, we have taken care to provide a safety net for the poor. We have a guaranteed wage employment programme that assures to the poor work for 100 days in a year and provides them a wage of Rs 80 (or US$ 2) per day. We give a modest pension to old and poor persons. We have offered the State governments a death and disability insurance scheme at no cost to the beneficiaries, and we intend to enroll 10 million families under the scheme this year. We also offer a health insurance scheme at no cost to the beneficiaries. All this is in the public domain, and accountability is enforced through a variety of instruments such as the NGO movement, public interest litigation and the Right to Information Act. On August 15, 2007, India turned 60, still a young nation. It is also a young nation in another sense. One-third of the population is below the age of 15 years. India is the only large country in the world where the size of the working age population will grow – and will exceed the number of dependent children and old persons – until 2025, the year up to which projections of population have been made, and perhaps even beyond till 2045. The size of the work force will grow, incomes will grow, savings will grow and investments will also grow. The challenge is to seize the opportunity and turn India into an economic powerhouse. Our vision for the future is based on the premise that growth is an imperative. But equally important is the axiom that unless all sections of our people benefit from economic growth and also have a stake in the development process it cannot be sustained. All types of inequities based on race, region, gender, community and religion inherently constrain the growth process and even harm it. The goal of a country committed to democratic development is to measure up to the rising aspirations of its people. We have before us an unfinished agenda of sustainable economic development in a democratic polity. Work is in progress, and we will succeed in building a caring, inclusive and prosperous India.” ********* BSC/GN-454/07