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
admi.
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
crores last year. If we had not acted,
it would have been over Rs. 200,000 crores 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 are having 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 crores 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 crores. 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 appeal to 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.
