Farm laborers tend to the fields near Bara Bara outside Mumbai, on December 29, 2002. (Photographer: Santosh Verma/Bloomberg News)

Atal Bihari Vajpayee’s Economy: ‘Policy No Good Without Implementation’

Excerpt of a speech by Prime Minister Atal Bihari Vajpayee at the meeting of the Prime Minister'’s Economic Advisory Council, on July 13, 2002, in New Delhi.

…we have set ourselves an ambitious GDP growth target of 8 percent a year during the 10th Five Year Plan. Is this achievable? Yes, I have no doubt about it. Over the past two decades, India has been among the six fastest growing economies in the world. No major democracy, barring Japan in the 1960s and 1970s, has at any time matched India’s growth performance in this period.

In particular, the services sector, which accounts for more than one-half of our GDP, has grown at 8.5 percent annually over the past 7 years. Exports have grown in the past decade from 5.5 percent of GDP to 9 percent in the case of merchandise, and from 3 percent to 8.5 percent of GDP in services. This year, our growth in the farm sector also has picked up.

What are the challenges that we must overcome in accelerating our GDP growth rate to 8 percent and beyond? Let me briefly touch upon a few critical development-related issues. I must clarify that the list is not exhaustive:

The first and foremost challenge is that of implementation.

I repeat what I have been saying to all the people in the government – at the centre and in the states – that our policies and programmes are only as good as their implementation.

In the past four years, our government has shown that we are determined to bridge the gap between promise and performance. Implementation of the new telecom policy; promotion of the IT sector; the ongoing work on the National Highway Development Project; and, lately, the successful completion of a number of disinvestment initiatives which have resulted in a transparent and non-discretionary procedure, which is a model of good governance -- these are just a few examples. But we are aware that a lot more needs to be done. If you were to ask me, “What is your first priority?”, I would say that it is to improve implementation capabilities across the board in the government.

Our new Finance Minister made an incisive point in his remarks before members of the Trade & Industry Council. He said that a major burden on our economy is the way our governmental machinery functions.

It is designed to achieve delay, not development; its preoccupation is procedures, not performance.

We have begun a comprehensive review of the current regulatory procedures, which impose significant transaction costs and delays on implementation of projects. Often these are traceable to poor project preparation, appraisal, and absence of a system of evaluation of the experience of completed projects to draw lessons for the future. These issues are common to both physical and social infrastructure.

The second challenge is to further speed up economic reforms so that India becomes a clear-cut market economy, with the government withdrawing from production, barring a few clearly specified strategic sectors. However, government must retain and further strengthen its role in policy-making, regulation and facilitation.

We need to ensure that regulation of markets is by competent and independent regulatory agencies.

These should follow transparent procedures, guided by the government’s clearly articulated policy-objectives.

Third, government would have to continue to shoulder dominant, though not exclusive, responsibility for physical and social infrastructure.

However, the laudable goals of a welfare state will now have to be pursued within a new framework -- mainly by broadening and deepening the scope of public-private partnership in education, healthcare, shelter, sanitation,care of the aged and the poor, and promotion of sports, arts and culture.

I think that economists, policy planners and those involved in successful examples of public-private partnership need to work together to develop innovative and practical ways of expanding this concept at all levels -- from national to local.

Fourth, even as try to speed up growth, how do we ensure that it will be employment-oriented growth, and not jobless growth or growth with less jobs?

The challenge of unemployment will become more acute as the youth segment of our demographic spectrum continues to expand in the coming years.

Fifth, higher growth rate demands higher rate of savings and channeling the savings into productive investments. Here, we need to remove the imperfections that are plaguing our financial markets. It should be our special endeavour to ensure that the poor and the unorganised sector have access to savings, credit, and insurance services.

Sixth, another essential element of our poverty alleviation strategy will have to be reduction and re-targeting of subsidies, so that the essential consumption of the poor, including social services, is protected, but the overall fiscal deficit is reduced. Barring those who deserve subsidy, we should develop a culture of making all others pay for what they use.

For example, as you know, the root of the problem in the power sector – which is one of the specific areas of discussion today – is that nearly half of the power sold is not billed, and much of what is billed is not collected. More or less, this is true about higher education, public transport, municipal services, and so on. No reform can succeed if this sad state of affairs persists.

The time has come for everyone to realise that, the nation is paying a heavy price in the form of slow and stunted development, for what citizens fail to pay.

Seventh, in the past four years, we have paid much attention to expanding and modernizing various aspects of connectivity -- both physical and digital. The country is already reaping the benefits of better and cheaper telecom and internet services. Our ambitious initiatives to develop highways and rural roads are being speedily implemented. To further widen our commitment to connectivity, the government will soon launch an initiative for accelerated completion of railway projects that are both critical and remunerative. If necessary, we will raise non-budgetary resources for this purpose. Putting Indian Railways on a path of fast-track growth is a fitting way to celebrate 150 proud years of this institution that has contributed so much to the nation.

Lastly,our long-term growth strategy should be closely aligned to our strategy on population.

The encouraging demographic transition, which has been revealed in the 2001 census, needs to be further accelerated. Our goal should be for total fertility rate to reach replacement levels within the time frame given in the National Population Policy, without recourse to measures which have previously caused major setbacks in India and elsewhere. In doing so, we should ensure that a greater proportion of the population is of working age, and savings rates increase further.

Retrieved from the official archive for Former Prime Ministers Of India.