ADDRESS BY SHRI K.R. NARAYANAN, VICE PRESIDENT OF INDIA, AT THE FEDERATION OF INDIAN CHAMBERS OF COMMERCE & INDUSTRY OVERVIEW CONFERENCE

NEW DELHI, NOVEMBER 13, 1992

India: New Economic Dimensions Project For Successful Implementation of Industrial Policy Reforms
 
I am happy to be here to-day in your midst for the First overview Conference on Successful Implementation of Industrial Policy Reforms being organized by the Federation of Indian Chambers of Commerce and Industry under the FICCI-USAID Project.
 
I am glad to learn from Shri Podar that FICCI will be organizing a nation-wide series of approximately 60 workshops in India, and six in U.S.A., during the next one year. The theme of the project is both important and timely.
 
India to-day is at a new stage of its economic development. Indeed, we are living in an era of dramatic changes the world over. Technological changes and the rise of consciousness among people have speeded up the movement towards world co-operation in the economic and political fields making the rationale of a world divided by the cold war utterly outmoded. In the relentless and, often, unpredictable march of technology, both ideologically controlled socialism and uncontrolled capitalism found themselves out of joint with the times.

The new stage of economic and technological development dictated on the one hand the need for freeing the economy from the shackles of controls and regulations and the withdrawal of the State from direct economic and commercial operations. On the other hand, it emphasized the necessity of the State playing a more positive role in the development of human resources and the building up of a system of social protection for the people, especially in the developing countries of the world. The phrases “social market economy” which has emerged in Germany and “socialist market economy” in China both reflect the two aspects of the current world revolution in economics.
 
In India it would be true to say, as it has been said, that the process of economic liberalisation and economic reforms has been somewhat slow to appear. But they were inherent, and growing gradually, in the system of mixed economy, that we had adopted since Independence. The public sector and the private sector had co-existed, and were expected to compete with each other, right from the beginning. Nobody will deny that in the process, bureaucratisation, controls and regulations of the economy grew, inhibiting the efficient functioning of both public and private sectors. The present policy of privatisation and marketisation had, thus, become an irresistible necessity for the further growth of the economy. At the same time within the old set-up, had developed an industrial infra-structure, a pool of technical personnel and managers and a middle-class estimated at 200 to 250 million strong.

These objective factors are not the accidents, but the achievements of our developmental efforts in the past. It is standing on the shoulders of these achievements that we have now launched our economic reforms and our new industrial policies. If there is not sufficient drama, speed and spectacular reversals, in our truly radical economic reforms, it is because of this background which did not necessitate these, as in economic systems which were, in varying degrees, subject to totalitarian controls. In my view Indian liberalisation cannot be appreciated fully, unless we view it in this context and also that of Indian democracy. I do hope that the FICCI seminars and workshops will bring out all the different aspects of the phenomenon of change taking place in our economy, which are what make our liberalisation process serious, long-term and irreversible one.
 
To-day the world environment is favourable for the implementation of our new policies. But we should not forget the fact that there have been cyclical fluctuations in global economy, which are visible in the upswing and downswing of world output and trade. The growth of world trade declined consecutively during the last three successive years. Expansion of output and trade is still hazy. This has been attributed to the rigidity that has developed in global economy whether in the form of protectionism or lack of structural adjustments. That competition is the key to growth, in these circumstances, is a realization that has dawned upon all economic players in varying degrees. That is what we in India have also realized and are determined to introduce in our economy.
 
The economic reforms that we have launched have already shown some positive and concrete results. After recording a negative 0.2 per cent growth last year, the industry has turned the corner and is expected to get restored to the level achieved in the late 80’s. On the export front, the declining trend has been reversed, and we hope to achieve better results in the months to come. This is despite the ongoing recession in most countries. Foreign investment position has also improved, and a number of multi-nationals have not only evinced interest in investing in India, but have already signed contracts for setting up units.

The foreign exchange reserves which had gone down to less than $ l billion are now over $ 6 billion. There are, however, concerns expressed by both foreign investors and the Indian Industries, on certain aspects of the implementation part of the policies. It is necessary that the policies pronounced must percolate downwards where the enterprises have to function. There should also occur mental liberalisation in those who implement the policies. And the enterprises themselves, both in the private and the public sector, have to grasp the truth that it is only by increase in production and productivity that the success of the new industrial policies will be actually tested.
 
I am afraid that the role of science and technology in economic development and in industrial development in particular, has not been fully grasped by us. There are no political or policy short-cuts to upgrading the technological basis and content of economic programmes. If we are to increase the quantity and improve the quality of products, for domestic markets and for competitive exports, technology has got to be applied on a massive and a pervasive scale. I am afraid industry has not yet made determined efforts in research and development and investment in this vital sector is almost minimal.

Despite the efforts made so far, the linkages between the scientific institutions and the industry has not been established neither integrally nor on an adequate scale. In the implementation of new industrial policies the part played by science and technology and research and development has to be emphasized as a major priority. The flow of technology freely from developed countries to developing countries is a basic postulate of the new economic liberalisation policy the world over. There ought not to be impediments in this flow if the new industrialisation policies are to produce the expected results. In the seminars and workshops being held in the United States I am sure that factor of technology transfer will be properly explained and emphasized.
 
In a vast developing country like India, where 80% of the population live in rural areas, industrialisation limited to 250 million middle class will not be enough for the success of the economic reforms. While we wax euphoric over this huge 250 million middle class, we must realize that they are not a separate nation, but intermingled in the ocean of 850 million people. Attempts at isolated development of the advanced will only create imbalances and dislocations in the entire system, to put it very mildly. Thus we have to work for advances in the crucial agricultural sector, in the small-scale and cottage industries sector of the economy, where the bulk of employment is generated.
 
Liberalisation policies, by implication mean, absence of controls. But after launching various liberalisation programmes can we leave them, serenely alone. There must be, in my opinion, a mechanism created, at some strategic centre of the governmental system, to observe and monitor, and perhaps to co-ordinate, the actual working of the policies and programmes. In that way only, we will be able to affect and assess the successful implementation of the reforms. Finally, I am happy that Ambassador Pickering is present here at this meeting, and I am confident that a message will go to his great country and to the developed world how earnest we are, in the Government and in the private sector, to pursue our reform policies to a successful conclusion...

Thank you.