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December, 15th 2012
                            PRESS INFORMATION BUREAU
                              GOVERNMENT OF INDIA


                                                            New Delhi, Agrahayana 23, 1934
                                                                        December 14, 2012

        The Union Finance Minister Shri P Chidambaram has said that the Government is
making every effort for turnaround of the economy and creating investor friendly climate. He
further stated that external sector vulnerabilities are affecting the Indian economy because of
the rapid globalization of the economy. Shri Chidambaram was delivering this inaugural
address at the Delhi Economics Conclave in New Delhi today. Following is the text of his
speech :

      i.   "I welcome you to the Delhi Economics Conclave organized by the Ministry
           of Finance in collaboration with National Institute of Public Finance and
           Policy (NIPFP) and Confederation of Indian Industry (CII). Let me
           congratulate the team in the Economics Division for organizing this conclave
           for the third successive year and thank NIPFP and CII for their support and
           cooperation. I understand that, besides the plenary sessions on the first and
           second days, there are satellite conferences organized by other organizations
           as part of this Conclave. Let me offer my thanks to those organisations too.

     ii.   The theme of this conclave is "Reviving Growth". Nothing can be more
           topical. As far as I know, this is the subject that is engaging the attention of
           all countries of the world. Be it the G-7 or the G-8 or the G-20 or the G-24
           comprising the developing countries, at every forum the prime topic of
           discussion is how to revive global growth. The world economy is passing
           through its most difficult phase since 2008. The Euro zone as a whole is,
           technically, in recession with negative growth in the second Quarter and the
           third Quarter of 2012. Growth in the US has too slowed as a result of political
           uncertainty over the "fiscal cliff". Other major economies such as Japan and
           Brazil have seen their growth stalled.

    iii.   The emerging economies are affected not only because of the fall in
           international demand for their products, but also because of the severely
           diminished policy space they have to stimulate their economies after the crisis.
           Higher inflation and higher fiscal deficits make it hard for the emerging
           economies, with few exceptions, to resort to standard counter-cyclical

    iv.    The immediate fallout has been a sharp deceleration in global economic
           growth. As per the IMFs World Economic Outlook, October 2012, growth in
           world output is expected to decrease to 3.3 per cent in 2012, from 5.1 per cent
           in 2010 and 3.8 per cent in 2011. Advanced countries, as a group, are
        expected to grow only by 1.3 per cent, down from 3.0 per cent in 2010 and 1.6
        per cent 2011. Emerging market and developing economies are expected to
        grow by a modest 5.3 per cent, as against 7.4 per cent in 2010 and 6.2 per cent
        in 2011. There has been a sharp decline in growth all over the world since

  v.    Global trade has also been affected. The volume of world trade (goods and
        services) is expected to grow by 3.2 per cent in 2012, after growing at 12.6 per
        cent in 2010 and 5.8 per cent in 2011.

 vi.    Indias GDP growth that was 8.4 per cent in 2009-10 and 2010-11, slipped to
        6.5 per cent in 2011-12, partly due to the fallout of the euro zone crisis. A
        closer look reveals that the slide in growth is correlated with the
        intensification of the euro zone crisis, which began worsening towards the
        middle of fiscal 2011-12. Since the first Quarter of 2011-12 when the GDP
        grew at 8.0 per cent, there has been a secular decline in the growth rate in
        every successive Quarter. The growth rates in Q I and Q 2 of the current
        fiscal (2012-13) have been 5.5 per cent and 5.3 per cent respectively.

vii.    The performance of Indias external sector has also not been encouraging.
        The countrys trade deficit was 10.3 per cent and the current account deficit
        4.2 per cent of GDP in 2011-12. This was because, while export growth
        slowed considerably, imports continued to remain high due to high
        international oil prices and gold imports. This is unlike the situation during
        the 2008-09 global crisis. At that time, oil prices plunged following the
        collapse of Lehman Brothers in September 2008. Further, the decline in
        imports was sharper than the decline in exports. In my view, the present
        challenge is therefore different and calls for bold and innovative measures.

viii.   External sector vulnerabilities are affecting the Indian economy because of the
        rapid globalization of the economy. The economy is more open. This can be
        gauged from the fact that the trade in goods and services, which was 22.9 per
        cent of GDP in the 1990s (i.e. the average for the decade), increased to 55.7
        per cent of GDP in 2011-12. Similarly, payments and receipts on the capital
        account, which were at 15.1 per cent of GDP in the 1990s, increased to 48.2
        per cent of GDP in 2011-12. As a result, global developments have an
        increasingly larger impact on the Indian economy through the trade and
        capital account channels. Besides, in the global environment of uncertainty
        and low investment, the impact is also transmitted to the economy through the
        confidence channel.

 ix.    In such a situation of uncertainty and low investment, Government has been
        making every effort to turn the economy around and create a more investor-
        friendly climate. We have taken a number of steps to encourage foreign direct
        investment, including allowing, recently, FDI in multi-brand retail, civil
        aviation and some broadcasting services. Against considerable opposition, we
        also raised the prices of certain petroleum products in order to contain the

        subsidy bill and to discourage over-consumption. We have initiated measures
        to move all cash benefits to a technology-enabled platform so that the benefits
        are transferred directly to the bank accounts of the beneficiaries; we expect
        that the Direct Benefit Transfer Scheme will be a game-changer and will
        eliminate nearly all leakages, duplication and falsification and bring a greater
        degree of transparency and efficiency. We are also addressing some tax
        issues that have created uncertainty in the minds of the investors and we have
        made it clear that our objective is to have clarity in tax laws, a stable tax
        regime, a non-adversarial tax administration, a fair mechanism for dispute
        resolution, and an independent judiciary. Yesterday, the Cabinet took some
        important decisions. Among them was a decision to set up the Cabinet
        Committee on Investment to quicken the pace of decision making in critical
        infrastructure projects. The Cabinet also approved a landmark draft Bill on
        Land Acquisition and a new investment policy for urea plants.

  x.    It is too early to say whether the measures have begun to bear fruit, although it
        is our expectation that they will do so. Manufacturing PMI has risen to a 5-
        month high. Foreign portfolio capital inflows have been robust in the last few
        months, amounting to USD 21 billion up to November 30 this calendar year.
        The stock markets leading indices have risen by about 11.5 per cent between
        August 1 and December 13, 2012, pointing to growing investor confidence
        and the return of the small investor. While headline inflation has moderated to
        7.5 per cent, inflation measured by the consumer price index remains sticky at
        9.9 per cent. There is no reason at all to become complacent.

         xi.   What scope is there for international co-operation in reviving growth,
               the theme of this conference? In their declaration at Los Cabos earlier
               in the year, G-20 leaders declared that "all G20 members will take the
               necessary actions to strengthen global growth and restore confidence."

        Dr. Manmohan Singh, Prime Minister of India, said at Los Cabos,
        "Infrastructure investment in developing countries assumes special
        importance in this context. It lays the foundation for rapid growth in the
        longer term, while providing an immediate stimulus for their economies and
        also for the global economy, by providing a robust source of demand."

        He added, "An expansion of investment in infrastructure in developing
        countries is only possible if they can get access to long term capital to finance
        such investment. This is difficult at a time when capital flows are disrupted.
        The Multilateral Development Banks can play a major role in this context."

xii.    I would like to remind this Conference that the G-20 Leaders asked their
        Finance Ministers and Central Bank Governors to consider ways in which the
        G20 can foster investment in infrastructure and ensure the availability of
        sufficient funding for infrastructure projects, including financing and technical
        support by the Multilateral Development Banks (MDBs).

xiii.   However the fiscal challenges faced by the advanced economies give them
        little appetite to shore up the resources of the MDBs. On the other hand, gross
        savings as a share of GDP have increased significantly in a number of the
        Asian countries who are members of G20. Keeping in mind these realities, I
          propose that the Asian G-20 countries, including China, Japan, South Korea,
          India, Indonesia, Australia and possibly Russia, should take the initiative to
          enhance the resources of the leading MDB in the region, the Asian
          Development Bank (ADB). The ADB plays a crucial role in regional
          investment and development. If we do that, the ADB will be in a position to
          play a greater and more defining role in regional infrastructure financing,
          which in turn will allow countries like India to contribute to a greater degree
          to domestic and world growth. I appeal to the Asian G-20 members to come
          together in an effort to increase the resource base of the ADB so that we can
          co-operatively carry forward the G-20 agenda.

   xiv.   India weathered the crisis very well in 2008 and I am confident that the steps
          we have taken ­ and some more steps that we will take in the next few weeks
          - will help turn the Indian economy around. However, every country has to
          introspect on whether the domestic and external issues have been diagnosed
          correctly and whether the policy options have been exercised adequately and
          effectively. What are we missing and what else do we need to do to ensure
          sustainable growth in the coming years? I am sure with the distinguished
          group of invited speakers with diverse backgrounds, the questions discussed
          in this Conclave and the answers that will be thrown up will serve as useful
          policy inputs for us in the Government, especially the Ministry of Finance.
    xv.   Let me once again congratulate the organizers in bringing together a galaxy of
          experts from different areas and from different parts of the world to discuss
          the crucially important issue of how to revive growth.

        Organised by the Department of Economic Affairs, Ministry of Finance Ministry,
Government of India the opening session of the conclave was attended by Shri Tharman
Shanmugaratnam, Deputy Prime Minister and Finance Minister, Singapore, Shri Pravin J.
Gordhan, Finance Minister, South Africa and Dr. Sarath Amunugama, Senior Minister for
International Monetary Cooperation & Deputy Minister of Finance and Planning, Sri Lanka,
Dr. C. Rangarajan, Chairman, Economic Advisory Committee (EAC) to PM, Dr. Arvind
Mayaram, Secretary, Economic Affairs, Dr. Raghuram G. Rajan, Chief Economic Adviser
besides delegate from India and abroad. The theme of this years Conclave is ,,Reviving

       The conclave will be continuing till December 21, 2012. After the plenary sessions
during the first two days, satellite conferences will be held on various issues related to
finance and economy.

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