Jayant Sinha, Union Minister of State for Finance, delivered the keynote address at the Morningstar Investment Conference held in Mumbai in October 2015.
While he mentioned that there are transformational changes underway in the Indian economy, he spoke of six concrete game-changing reform initiatives launched by the government. Below is an extract from his speech.
1) UNIVERSAL SOCIAL SECURITY
What we've been able to do with the Jan Dhan Yojna is to ensure within 100 days that 100% of Indians have a bank account. Did you know that every single Indian family now has a bank account? This was achieved in 100 days. Even before January 26, 2015 we were able to do that. That was our target date.
The power of that is being shown in things like the PaHal programme for the LPG subsidy, where we have brought down gas subsidy payments by Rs 15,000 crores. We have reduced a subsidy burden there and because we have the ability to reach every single Indian family, we can ensure that all the benefits that Indian citizens are entitled to get to them directly, efficiently and effectively. And this enables us to put in place the platform for a Universal Social Security programme. So whether it is the gas subsidy, NREGA payments, the Viklang or Vidhwa pension that the government pays, scholarships, food distribution in some of the Union Territories; we can actually deliver that to you directly into your bank account without any intermediaries coming in and taking a cut and really.
Franklin Delano Roosevelt, the American president at the time of The Great Depression, brought in Social Security in America. To this day he is remembered as one of the greatest of American presidents.
So Universal Social Security, the ability to get government benefits into the hands of every beneficiary directly, efficiently, swiftly is just an extraordinary accomplishment that we have achieved by creating Jan Dhan Yojna, Suraksha Bima Yojana, Mudra Yojana and other benefit programmes.
2) EMPLOYMENT
What we're doing in Make in India, Skill India, Mudra, Startup India- all of this is intended to address one of India's most important priorities - good jobs for our young people and the performance indicators that are coming back to us on this dimension.
India is the number one FDI destination in the word right now and we have gotten ahead of China as far as this is concerned. So there's more money that's come to India, 40-50% more in the last year than the previous one because of what we have done for Make In India - whether it's FDI in insurance, defense, railways, or whether it's the way in which our Foreign Investment Promotion Board is working.
Obviously, the ease of doing business efforts to really make it possible for you to get your business started in India are also making a difference.
But all of this becomes real when a Foxconn says that they're going to put a number of factories in India, when SoftBank and Amazon says that they will invest in India. When Boeing, Airbus, Ford, and global businesses look at India and get excited because of the policies of Make In India, ease of doing business, Skill India, Startup India and so on, and start to invest in India, build factories and create jobs.
Let's not forget what our startups are doing and the very exciting work that our e-commerce companies are doing. Yesterday I met the team from Snapdeal. They have been able to raise hundreds of millions of dollars of venture capital to really go out and build a marketplace platform for the small merchants of India. They have 300,000 merchants on their platform and they are digitizing them. They're giving them the services, the digital software, all of the online methodologies, so that they can actually take their products and sell them through this online platform, just like Alibaba has done in China.
All of the forces that have been unleashed through FDI are really going to create lots of jobs for our young people. This is a profoundly important and game changing initiative that our government has unleashed.
3) AGRICULTURE
Agriculture is vitally important because 60-70% of our workforce is employed in agriculture. People's incomes, quality of life - everything depends on agriculture. I myself come from an agricultural area in Hazaribagh. So we completely understand the challenges and the issues our agricultural sector is facing.
Through the Pradhan Mantri Krishi Sinchai Yojana we're providing more agricultural credit and streamlining fertilizer availability. Not to forget the Soil Health Card. We have committed to provide irrigation to every field in India. That is going to take time. But when it clicks, when fully implemented, it will be absolutely transformational and will change the face of India.
Did you know that 60% of our fields are rain fed and therefore they're only able to grow one, maybe two, crops a year?
When you have irrigation, you can grow three crops a year, you provide more employment and income and bring down food inflation because of increased supply. We've allocated Rs 50,000 crores for this is an extraordinarily important initiative - Pradhan Mantri Krishi Sinchai Yojana, and it is going to be profoundly important over the next two to three years.
4) FINANCIAL REFORMS
In our financial sector, we've put in place three or four very important building blocks. The Indradhanush programme is the broadest and most important set of changes for our public sector banks, since they were nationalised in 1969. Now, 46 years later we have put in place the most important set of changes to really strengthen our banks. This is really going to make a huge difference as far as our public sector banks are concerned.
In addition, we have licensed 11 payment banks, 10 small banks, and two scheduled commercial banks, which is Bandhan and IDFC Bank that are also coming in. We have opened up the entire financial sector for mobile wallets, digital wallets, for payment systems and so on. This means an incredible set of changes to the financial sector. We've added a lot of banking capacity and a whole host of new deposit taking institutions.
Did you all know that the post office has got a payment bank license?
Do you know how many branches our postal service has? 1.55 lakhs, almost 1.6 lakhs.
How many villages do we have in India? 6 lakhs.
So when you have that kind of coverage, a post office close to virtually every village, the availability of financial services goes up dramatically because of what we're doing with the payment banks. This is going to make financial services and Social Security, which is going into your bank account, very convenient and easily accessible to every single Indian.
These changes in the financial sector are being underestimated as far as the long run is concerned.
And finally, the Monetary Policy Agreement that we have signed with the Reserve Bank of India, where we are focusing on inflation specifically 4%, +or-2, that in itself has been a very historic move.
5) INDIA'S FISCAL ARCHITECTURE
The changes we have unleashed in India's fiscal architecture, the architecture of the Indian state, is just extraordinary. And the speed at which we've done it! People are not fully comprehending the long-term impact of all of this.
Are you all familiar with this devolution to the states debate that happened during the Budget?
How much of the consolidated tax pool do you think now goes to the states? 42%.
Do you know what it was prior to this? 32%.
10% on 32% is 33%.
That's a very large change.
Prior to the 10% increase in the 14th Finance Commission, what was the largest increase in history?
In the 13 other Finance Commissions in the 65 years of being a Republic, the change has been 2.5%. So we went from 2.5% as the biggest increment to 10%. That's huge. That's remarkable. And it is in line with our thinking around cooperative federalism, where we want to make the states stronger and want them to take responsibility for delivering public services to their citizens and to be able to tailor and customize programmes that best suit their citizens.
We've changed the way the Planning Commission used to work by setting up the NITI Aayog, and the whole relationship between the Centre and the States has effectively been changed because of this much larger devolution to the states.
GST is profoundly changing the fiscal architecture of the Indian state.
In the GST you pool the taxing power of the state and the Centre together into the GST Council. And it's the GST Council that totally streamlines indirect taxation in India across all the different states and gets that alignment and synchronization.
The states have to surrender their taxing powers and the Centre has to surrender its taxing powers. It gets pooled in the GST Council. That's why we need a Constitutional amendment, and that's why it has to be passed with a two-thirds majority in the Rajya Sabha. And the fact that the Rajya Sabha has not been allowed to function and the fact that we've not been able to have a reasonable debate about GST and get it passed is absolutely tragic, because the GST is going to be a tremendous impetus to Indian growth.
We're going to reduce corporate tax rates from 30% to 25%. In doing so, we're going to get rid of a whole host of exemptions.
This is game changing breakthrough stuff that will change the fiscal architecture of the Indian state.
6) PUBLIC INVESTMENT
We have increased the allocation to roads and, as a result of that, you can see the activity on our national and state highways. Road construction, public investment in roads, ports and bridges has gone up dramatically.
Did you know that in the last 10 years there's been virtually no CapEx in the Indian Railways? The Railways were chronically starved of investment. We have said that we're going to put Rs 8.5 lakh crores, almost $150 billion, into the railways over the next five years. We're going to transform the railways by that kind of CapEx.
So the public investment that's going into roads, bridges, highways and railways is unprecedented. You can see that in the public accounts - the CapEx that's going in right now is 38% higher than it was last year.
Again, we are underestimating the long-run impact of transforming the railways and adding lots and lots of high-quality national highways.
Why are we trying to transform this Indian economy and provide that boost through all of these reform efforts? What are the challenges we face?
Read on......
