Why India lags in innovation

International patent applications filed from India dropped to 1,423 last year—as compared to Japan’s 44,235, China’s 29,846 and South Korea’s 14,626 in the same period

Prime Minister Narendra Modi’s flagship Make in India initiative seems to be a grand success. It has notched up overseas investment commitments of more than $400 billion over the past two years. India will have turned a new leaf in attracting foreign direct investment if these commitments are realized.

The government plans to create 100 million new factory jobs by 2022 and increase manufacturing’s share in the economy to 25% during the next six years. That India is open to international business and willing to remove all regulatory hurdles to embrace foreign capital has become a clarion call of Modi and his finance minister almost on a daily basis.

But, in one area, the Make in India programme is yet to generate positive results. This is the area of “incidence and location of innovation”, which is a pre-requisite for generating new knowledge in science and technology.

Consider international patent applications filed from India to assess the innovative activity generated by the much-publicized Make in India initiative. According to figures released by the Geneva-based World Intellectual Property Organization under the Patent Cooperation Treaty, international patent applications filed from India dropped to 1,423 last year—as compared to Japan’s 44,235, China’s 29,846 and South Korea’s 14,626 in the same period.

In 2014, Indian research and manufacturing entities, both in the private and public sector, filed 1,428 international patent applications as compared to 42,381 by Japan, 25,548 by China, and 13,117 by South Korea.

The US, numero uno in the arena of innovation and inventions thanks to the sustained large-scale public funding to the Centers for Disease Control and Prevention and the defense department, filed 57,385 international patent applications last year.

Surprisingly, the filing of patent applications by Indian firms and research departments over the past three years remained almost flat with 1,320 in 2013, 1,428 in 2014 and 1,423 in 2015.

While the US, Japan, China and South Korea continue to dominate global patent activity, India remains a bit player. China, a late entrant into the world of innovation and inventions, is now racing ahead in its long march to be the world’s champion of the latest technologies. It has developed technologies across areas, including solar technologies for harnessing renewable power.

China’s Huawei Technologies, with 3,898 patent applications, almost three times the number of patent applications filed from India, ranks first among companies in the world.

Paradoxically, at a time when India has eclipsed China as the world’s fastest growing major economy with its gross domestic product forecast to increase to 7.6% in the fiscal year through March, it has performed poorly in generating measurable innovative activity.

Despite sending an orbiter to Mars and making strides in fields such as pharmaceutical products, India is nowhere to be seen on the international science and technology radar.

It is a different issue that the country’s most talented human resources continue to dominate inventions in several areas abroad.

How does one explain India’s poor performance in creating new knowledge that is useful for tackling its bread-and-butter as well as environmental problems? Is it because of an attempt to ‘saffronize’ science based on ancient claims of landmark scientific discoveries (the Pythagorean theorem, zero, genetics and plastic surgery, among others), thereby undermining the need for fresh research on the ground that everything is already there in the Vedas? Is it due to a lack of investment in basic and applied science and technology that is essential for innovation which, in turn, accelerates the pace of intellectual property activities? Can innovation and inventions happen in India when there is no transmission of existing knowledge, which is the basis for the generation of new knowledge?

These are some questions that continue to baffle analysts and historians of science.

“The problem of demarcation between science and pseudoscience is not merely a problem of armchair philosophy; it is of vital social and political relevance,” said Imre Lakatos, a Hungarian philosopher.

Surely, this could not be truer anywhere than it is in India today, according to Meera Nanda, a science historian. “All possible lines of demarcation between legitimate science and ideas pretending to be scientific are being erased,” said Nanda.

Lamenting the lack of rigorous scientific study, mathematician and historian D.D. Kosambi once said: “...the western mechanism of scientific study is blunted in our (Indian) hands to a crude toy for producing the feeblest of memoirs and papers, for grabbing a few allowances and grants.” Unfortunately, he said, “Renaissances are not ‘made’ in this fashion; they have to bloom as the expression of a new form of society, one far more productive and kinder to its members than the older one.”

The greatest obstacles to research in any underdeveloped country are those needlessly created by scientists or a scholar’s colleagues and fellow citizens, according to Kosambi. Instead of throwing money “away on costly fads like atomic energy”, Kosambi argued more than six decades ago for developing “solar energy, neglected by the advanced countries because they have not sunlight as much as the tropics”. He also squarely blamed the religious system of beliefs for India’s backwardness.

At the World Economic Forum meeting in Davos over two months ago, a prominent Indian IT businessman, who asked not to be identified, said that his greatest worry about India is the increasing “saffornization”, which is slowing progress in science and technology.

“Science is the cognition of necessity; freedom is the recognition of necessity,” Kosambi had famously said, for finding out why a certain thing happens, which we can then turn to our advantage rather than be ruled helplessly by the event.

In the current climate that seems to foster “un-questioning”, the Make in India push could turn out to be a new phase for producing indentured labourers for the 21st century than building a reservoir of scientists and technologists. Alas, such a programme cannot coexist with anachronistic and antediluvian social beliefs, which undermine scientific inquiry and questioning.

ISIS and Europe’s questions of identity

A redressal of internal fissures in Europe has to accompany military action

Last week, the Brussels bombings, coming on the heels of the Paris attacks in November, underlined Europe’s vulnerability and the scope of the Islamic State (ISIS) network and operations within its boundaries. This week, ISIS has been pushed out of Palmyra in Syria by the Syrian army, reversing gains made 10 months ago. These contrasting developments hint at the shape of ISIS’s continuing evolution. And as importantly—perhaps more so—they underscore the question of Europe’s response and the fundamental nature of the European project.

Brussels and Paris mark the beginning of a new phase—the rise of a more focused, efficient ISIS network in Europe. The two years preceding them were a learning curve; failed attacks mounted under the direction of Abdelhamid Abaaoud, the man who oversaw the Paris attacks, lacked planning and the requisite skill set. ISIS operatives in Europe have been training to use triacetone triperoxide—their signature explosive, easily made from freely available items such as nail polish remover—since 2013. But it is difficult to master because of its unstable nature and using it requires a degree of professional training.

The recent attacks have shown that ISIS has begun to attain that. And they are paired with a shift in tactics hinted at last March by Boubaker al-Hakim, a leading French jihadist, who advised followers to “stop looking for specific targets. Hit everyone and anything”. In effect, the group is shifting from insurgency tactics—taking aim at targets with strategic or symbolic value—to a more distilled form of terrorism, creating as much chaos and pain as possible with the largest potential number of victims.

And therein lies the European Union’s greatest dilemma. In the wake of Brussels, as in the wake of Paris, there will be a focus on the state’s security apparatus and the operational details of its anti-terrorism efforts. This is as it should be. The poor security infrastructure of a number of European states and the patchwork nature of the EU’s intelligence networks—confined by national boundaries and hobbled by ineffective information sharing when up against a threat that, thanks to the Schengen system, faces no such constraints—must be addressed.

But the deeper questions pertaining to European multiculturalism are more difficult to get a grip on. It is a given that the vast majority of Europe’s Muslims have no truck with the Islamic State’s ideology, objectives or tactics. Issues of integration and economic opportunities, however, are not new. And the alienation and ghettoization they have caused in France, Belgium and elsewhere on the continent have resonated in unhealthy fashion.

In Belgium in the 1990s, for instance, arms and ammunition were sourced by jihadists in Brussels for Algerian terrorists attempting to establish an Islamic state, while Belgian residents travelled to fight in Chechnya and elsewhere.

It is easier to have a meaningful conversation about such issues in times of economic plenty. European states failed to do so. The conflict proliferating in West Asia, driving a million refugees and economic migrants to the EU each year, has exacerbated the stress in the European economies present since 2008. And an ugly nativist response has arisen from the right of European politics and entered the mainstream across the continent, capitalizing on the understandable fears of a populace uncertain about the cultural and economic impact of the surge in immigration.

The ISIS understands this perfectly and is capitalizing upon it in both strategic and tactical terms. As far as the former goes, recent reverses on the ground in Syria and Iraq—in the past six months, it has lost about 30% of the territory it held at its peak in 2014—led it to shift focus from controlling territory to spreading its influence in Europe and elsewhere in a meeting of top leaders shortly before the Paris attacks, as reported by The Guardian. And as for the latter, the flow of immigrants into Europe serves to heighten political and economic tensions on the continent—a plus from ISIS’s perspective—and makes it that much easier for the group to recruit consequently radicalized Muslims with European passports to form sleeper cells.

Difficult days await Europe, not just in facing the security threat but in examining and defining European identities. Military action against the core of ISIS in West Asia by regional and western actors may degrade its capabilities and resources. But addressing the tensions and fissures in the EU require those difficult conversations if European societies are to maintain their essence without giving in to far-right xenophobia.

Is Europe equipped to fight the menace of ISIS?

How many billionaires are self made?

Data shows that 63% of the world’s billionaires are self made, and their wealth accounts for about 59% of the total wealth of billionaires worldwide

This fast growth of self made billionaires can be seen in India too—self made billionaires grew their wealth nearly 17 times since 2001, compared to nine times for those who inherited wealth. Photo: iStockphoto

The world remains on a fragile recovery path after the 2008 crisis, yet there has been no slowdown in the growth of extreme wealth. From 1996 to 2014, billionaires’ wealth worldwide has grown six-and-a-half times; for Indian (dollar) billionaires this growth has been a phenomenal 40%, says a paper from the Peterson Institute for International Economics, in the US.

A majority of these billionaires are self made. Data from a paper, ‘The Origins of the Super Rich: The Billionaire Characteristics Database’, by Caroline Freund and Sarah Oliver, shows that 63% of the world’s billionaires are self made, and their wealth accounts for about 59% of the total wealth of billionaires worldwide. In emerging markets, close to 80% of billionaires are self made.

In 1996, China did not have a single billionaire. Fast forward to 2014, and the list of Chinese billionaires has risen to 153. Only three of these billionaires have inherited their wealth, and only two have political connections that have helped them expand their fortunes. Within Europe, wealth has moved eastwards, while in Asia, wealth has moved from Japan to China.

This fast growth of self made billionaires can be seen in India too—self made billionaires grew their wealth nearly 17 times since 2001, compared to nine times for those who inherited wealth. In Europe, in contrast, billionaire wealth is still largely inherited, and over 20% of inherited billionaires are fourth-generation or later.

At close to 50%, Latin America accounts for the largest share of inherited billionaires, followed closely by the Middle East, where about 44% of all billionaires have inherited their wealth.

The authors of the paper have one caveat though: their source of data is the Forbes magazine rich list. They say that it is possible that some private companies may not have made it to the list as valuation is difficult. The other concern is that inherited wealth is more likely to be diversified, and thus may have been overlooked. Here are four sets of charts that examine the characteristics of billionaires.

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The list of inherited billionaires includes names from India’s biggest corporate houses: Kumaramangalam Birla, Venugopal Dhoot, Pankaj Patel and Adi Godrej, to name a few. The technology sector accounts for the greatest share of self made billionaires in India. This is closely followed by the consumer sector, which has names like jeweller Nirav Modi and soft drinks maker Ravi Jaipuria.

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In 1996, India had only three billionaires—Dhirubhai Ambani, Lakshmi Mittal and Kumaramangalam Birla. By 2001, Mittal had left this list, but Shiv Nadar and Azim Premji made their entry. The entrance of Nadar and Premji, both of whom built their wealth in the IT sector, was a sign of the riches that leaders of this sector would reap. It took only 13 years for the list of billionaires to grow from five to 56. By 2014, the IT sector in India accounted for seven billionaires.

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Who are the billionaires who lead consumer firms in India? This list includes leaders of several automotive and related industries such as Rahul Bajaj, Vikram Lal, Baba Kalyani and Lachhman Das Mittal. The richest Indian billionaire is Mukesh Ambani, closely followed by Lakshmi Mittal and Premji.

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In 1996, there were 31 women billionaires worldwide. By 2014, that number increased by 480% to 180. However, this is way behind the overall rate of increase of billionaires worldwide. Only two Indian women, Savitri Jindal and Indu Jain, are billionaires. Globally, only 43 women are self made billionaires. The list of self-made women billionaires includes Facebook chief operating officer Sheryl Sandberg, media magnate Oprah Winfrey and founder of clothing chain Forever 21 Jin Sook Chang.

Raghuram Rajan warns against side-effects of aggressive monetary policies

RBI governor Raghuram Rajan says aggressive monetary policy actions by one country can lead to measurable and significant cross-border spillovers on other economies

Aggressive monetary policy actions by one country can lead to measurable and significant cross-border spillovers on other economies, especially as countries contend with the zero lower bound, said a Reserve Bank of India working paper authored by Prachi Mishra and governor Raghuram Rajan released on Monday.

Zero lower bound refers to a macroeconomic problem that occurs when policy rates are near zero, causing a liquidity trap and limiting the central bank’s capacity to stimulate the economy further.

If countries do not internalize these spillovers, they may respond by undertaking policies that are collectively suboptimal, said the paper, suggesting that countries should agree to guidelines for responsible behaviour that would improve collective outcomes.

“The bottom line is that simply because a policy is called monetary, unconventional or otherwise, it may not be beneficial on net for the world... What matters is the relative magnitude of demand creating vs demand switching effects, and the magnitude of other net financial sector spillovers, that is, the net spillovers,” the paper said.

The paper highlighted that exchange rates tend to be the channel through which these spillovers often transmit.

“In a world besieged by accusations of ‘currency wars’ and ‘negative spillovers’, owing to the extensive recourse to unconventional monetary policies and exchange rate depreciations, measuring this effect is important,” the paper said.

The tone of the paper mirrors Rajan’s recent public calls for a collective thinking on unconventional policies adopted by global central banks. Rajan has used the analogy of traffic signals to rate monetary policies.

Noting that almost all central banks have specific domestic mandates, the paper warned of the risk of policymakers attaching a lower weight to international spillovers while deciding on their policies.

To prevent this, the paper argues for a new set of rules in global monetary policymaking wherein policies could be rated green, orange or red, depending on their positive local effects and negative spillover effects on foreign countries.

“To use a driving analogy, polices that have few adverse spillovers, and are even to be encouraged by the global community should be rated green, policies that should be used temporarily and with care could be rated orange, and policies that should be avoided at all times could be rated red,” said the paper. These policies would also take into consideration the stage of an economic cycle in the country where the policies are originating, it added.

Also, policies should be rated based on their effects in the medium term rather than on a one-shot static effect.

Conventional monetary policy could get a green rating while policies that have large positive effects for the originating country but small sustained negative effects on other countries could be used sparingly and rated orange. Policies that have net adverse effects on foreign countries and on global welfare should be rated red and avoided at all times.

Another factor that policymakers could look at while rating policies is to give a greater weight to spillover effects to poorer countries that have weaker institutions, the paper argued.

The authors conceded that an agreement on common rules for policy is difficult and could take time. Further, existing economic models do not provide empirical analysis for a clear-cut rating of policies. The paper listed several models, including that of the IMF and US Federal Reserve, which could be used to assess the spillover effects of policies, but these have shortcomings and are extremely complicated.

“Nevertheless, with economic analysis of these issues at an early stage, it is unlikely we will get strong policy prescriptions soon, let alone international agreement on them, especially given that a number of country authorities like central banks have explicit domestic mandates,” the paper said.

The authors called for a discussion among policymakers at various fora such as the G-20 meet and IMF meetings.

“Such a discussion need not take place in an environment of finger pointing and defensiveness, but as an attempt to understand what can be reasonable, and not overly intrusive, rules of conduct,” the paper said.

Agriculture Ministry Issues Directives to the States to Check the Adverse Affect of White Fly on Cotton

Agriculture Ministry Issues Directives to the States to Check the Adverse Affect of White Fly on Cotton

Union Agriculture and Farmers Welfare Ministry has issued extensive directives to the States producing cotton to check the adverse affect of white fly on cotton. Ministry of Agriculture and Farmers Welfare has given these directives in view the likely menace to the crop of cotton in Punjab, Haryana and Rajasthan from white fly. White fly had inflicted tremendous damage to cotton last year in Punjab and Haryana.

To save crop of cotton from the likely menace of white fly, the Ministry of Agriculture and Farmers Welfare has taken various preventive measures. Elaborate assessment and analysis has been carried out about the loss inflicted last year. The sowing process of cotton is set in, in the beginning of April in the States of Punjab, Haryana and Rajasthan. Central Cotton Research Regional Centre, Sirsa (Haryana) has recently held a meeting in which officials of the Ministry of Agriculture, Scientists of Indian Council of Agricultural Research and senior officials of Departments of Agriculture from Punjab, Haryana and Rajasthan reviewed the preventive measures to check the menace of white fly.

After the review, the Government of India has forwarded extensive directives to the States of Punjab, Haryana and Rajasthan. The directives say that the sowing process may be carried out within the precincts of scheduled timeframe, only recommended seeds might be utilized, close watch might be kept on the movement of pests and timely sprinkling to check its spread. Indian Council of Agricultural Research has also provided a list of the pests resist seeds 4for the farmers. This year emphasis is being given on the timely sowing of cotton. 

defence Minister inaugurates Defexpo-2016 at Goa

defence Minister inaugurates Defexpo-2016 at Goa

The 9th edition of Defexpo India, a biennial exhibition on Land, Naval and Internal Homeland Security Systems was inaugurated today by the Defence Minister, Shri Manohar Parrikar at Naqueri Quitol, Quepem Taluka, South Goa, Goa. The four-day event is being organised by the Defence Exhibition Organisation of Department of Defence Production, Ministry of Defence.

At the outset Shri Parrikar announced that the Defence Procurement Procedure-2016 (DPP-2016) has been uploaded on the website of Ministry of Defence, commenting that it will provide a push to the ‘Make in India’ campaign. He said the Government has been proactive in its ‘Make in India’ initiative and desires to also include ‘Startup India’ which will find opportunities in Defence sector. The Defence Minister stated that the Government has tweaked the policies to address the concerns of defence manufacturers and suppliers and enhanced transparency. The new procurement policy being promulgated by DPP-2016 will ensure faster pace in procurement especially through newly introduced categories under Indigenously Designed, Developed and Manufactured (IDDM) provisions. Such provisions will encourage Indian Industry in Defence Sector, he added. He acknowledged the contributions of the Small and Medium Scale Industries in Defence Sector, quoting that many innovative ideas have come from these sectors. He further added that, while Foreign Direct Investment (FDI) in Defence Sector is capped at 49%, cases for higher FDI can be considered on case to case basis. He commended the organisers and the delegates present for the overwhelming response to Defexpo 2016 with record participation of companies in the event.

47 countries from different continents are taking part in the exhibition against 30 countries which participated in Defexpo 2014. In comparison to Defexpo 2014 where 624 companies participated; over 1000 companies, both foreign and Indian, are taking part this year. The net exhibition area sold during this edition is 40,725 square meters against 27,515 Square Meters in 2014.

On the sidelines of the exhibition, Seminars will provide a platform to showcase developments and opportunities in the defence sector. The topics of the Seminars being conducted on 29 and 30 March 2016 are Global Defence Supply Chain, advances in shipbuilding technology, Make in India for defence sector, India – Korea Defence Cooperation, Modernisation Programme of Indian Army and Challenges and opportunities of Defence Offset.

Text of PM’s address at the Bloomberg India Economic Forum-2016

Text of PM’s address at the Bloomberg India Economic Forum-2016

Mr. Micklethwait,
Distinguished guests,
Ladies and gentlemen.

I am pleased to be here today to mark twenty years of Bloomberg’s presence in India. During that period, Bloomberg has provided intelligent commentary and incisive analysis of India’s economy. It has become an essential part of the finance landscape.

Apart from that, I am grateful for the valuable advice that we have received from Mr. Michael Bloomberg in the design of our Smart Cities programme. As Mayor of one of the world’s great cities, Mr. Bloomberg has personal insight into what makes a city tick. His ideas have enriched the design of our Smart Cities programme. Under this programme, we hope to create one hundred cities which will become role models for urban development throughout the country.

The world expects much from India, in terms of contributing to global growth. To the extent that time permits, I would like to place before you my thoughts on how India intends to meet the challenge.

I will touch upon three major areas. Firstly, I will discuss India’s economic growth. Secondly, I will outline some of the administrative and policy reforms that have created and will sustain that growth. Thirdly, I will elaborate on an aspect of economic development which is of particular importance to me, namely job creation.

Experts are unanimous that India is one of the world economy’s brightest spots. We have low inflation, a low balance of payments current account deficit, and a high rate of growth. This is the result of good policy, not good fortune. Let me elaborate:

• Between 2008 and 2009 crude oil prices fell steeply from a peak of 147 dollars per barrel to less than 50 dollars. This was a steeper fall than between 2014 and 2015. Yet in 2009-10, India’s fiscal deficit, its current account deficit and its inflation rate, all got substantially worse. And this slide was from a higher base figure for all three. But in 2015-16, all three have improved, from a lower base.

• Many other emerging economies also depend on imported oil. If oil prices were the driver of success, those countries would all be showing similar results. But they are not.

• We have not been lucky with global trade or growth. Both are low, and have not helped us in terms of export stimulus.

• We have not been lucky with monsoons or weather. 2015 and 2014 have both been drought years. Drought was compounded by unseasonal hail storms. Yet food grain production has remained much higher, and inflation much lower, than in the last comparable drought year, which was 2009-10.

For India to be at the top of global growth tables is an unusual situation. Obviously, there are some who find that difficult to digest and come up with imaginative and fanciful ideas to belittle that achievement. The fact is that India’s economic success is the hard-won result of prudence, sound policy and effective management. I will elaborate on some of our policies later, but for now let me emphasize just one; fiscal consolidation. We have met ambitious fiscal targets in each of the previous two fiscal years. We have reduced the deficit even while increasing capital expenditure. And the reduction has come despite an unprecedented steep cut in the Centre’s share of tax revenues, in the award of the fourteenth Finance Commission. For 2016-17, we have targeted a fiscal deficit of 3.5 per cent of GDP. This will be the second lowest level in the last 40 years.

Our growth rate is acknowledged as the highest among major economies. There are some who remain confused and have said that the growth rate does not ‘feel’ right. Perhaps I can be of some assistance to them in reducing the confusion, by stating facts in place of feelings.

Let us first look at credit. There has been a smart pick-up in credit growth after September 2015. Credit off-take between February 2015 and February 2016 increased by 11.5 per cent. The overall fund flow to the corporate sector through equity and borrowings of various kinds, domestic and foreign, has increased in the first three quarters of 2015-16 by over 30 per cent.

There are some very interesting figures on credit ratings. In 2013 and 2014, the number of firms whose credit rating was downgraded was much higher than those who were upgraded. That has now changed decisively. Upgrades are up and downgrades are down. In the first half of fiscal year 2015-16, for every company getting a downgrade, there were more than two companies which received upgrades, the best level in recent years.

Among firms with low levels of leverage, the situation is even better. Upgrades exceed downgrades by a huge margin. The number of upgrades is 6.8 times the number of downgrades for large firms with low leverage; for medium-sized firms the ratio is 3.9; and for small firms it is 6.3. These are exceptionally robust numbers.

The only segment showing an increase in downgrades is highly leveraged large firms. The Government and Reserve Bank have taken tough action to recover dues from large corporate defaulters. Perhaps the noise from this segment has influenced media perceptions.

Moving from credit to investment, net foreign direct investment in the third quarter of the current financial year was an all-time record. But to me, more interesting is the dramatic increase in certain important sectors. In the period from October 2014 to September 2015, FDI in fertilizer was 224 million dollars compared to just one million in the period October 2013 to September 2014; in sugar, it was 125 million dollars compared to just four million dollars; in agricultural machinery, it doubled to 57 million dollars from 28 million dollars. These are sectors that are closely connected with the rural economy. I am thrilled to see that foreign investment is flowing into them.

In the year to September 2015, FDI in construction activities showed 316 per cent growth. Computer software and hardware had 285 per cent growth. FDI in the automobile industry grew 71 per cent. This is concrete evidence that the Make in India policy is having effect in employment intensive sectors.

In a difficult global environment for exports, manufacturing output has fluctuated. However, several key sub-sectors of manufacturing are growing rapidly. Motor vehicle production, which is a strong indicator of consumer purchasing power and economic activity, has grown at 7.6 per cent. The employment-intensive wearing apparel sector has grown at 8.7 per cent. Manufacturing of furniture has grown by 57 per cent, suggesting a pick-up in sales of flats and houses.

Looking towards the future, let me turn to agriculture. In the past, the emphasis has been on agricultural output, rather than on farmers’ incomes. I have set the objective of doubling farmers’ income by 2022. I have laid this out as a challenge, but it is not merely a challenge. With a good strategy, well-designed programmes, adequate resources and good governance in implementation, this target is achievable. And, as a large share of our population depends on agriculture, a doubling of farmers’ incomes will have strong benefits for other sectors of the economy.

Let me outline our strategy.

• First, we have introduced a big focus on irrigation with a large increase in budgets. We are taking a holistic approach which combines irrigation with water conservation. The aim is ‘per drop, more crop’.

• Second, we are focusing on provision of quality seeds and on efficiency of nutrient use. The provision of soil health cards enables accurate selection of inputs according to the requirements of each field. These will lower costs of production and increase net income.

• Third, a large portion of the harvest is lost before it reaches the consumer. In perishables the loss occurs in transit. In non-perishables, it happens during storage. We are reducing post-harvest losses through big investments in warehousing infrastructure and cold chain. We have greatly increased the outlay for agricultural infrastructure.

• Fourth, we are promoting value addition through food processing. As an example, in response to a call from me, Coca Cola has recently started adding fruit juice to some of its aerated drinks.

• Fifth, we are creating a national agricultural market and removing distortions. A common electronic market platform is being introduced across 585 regulated wholesale markets. We want to ensure that a higher share of the final price goes to the farmer, with less going to middlemen. The introduction of FDI in marketing of domestic food products in this budget is with the same objective.

• Sixth, we have introduced the Pradhan Mantri Fasal Bima Yojana. It is a comprehensive nationwide crop insurance programme which offers farmers protection from risks beyond their control, at an affordable cost. This scheme will ensure that their incomes are protected in times of adverse weather.

• Seventh, we will increase income from ancillary activities. Partly this will be through poultry, honey bees, farm ponds and fisheries. We are also encouraging farmers to use uncultivated portions of their land, especially boundaries between fields, for growing timber and placing solar cells.

Through a combination of

• growth in production,
• more efficient input use,
• reduction in post-harvest losses,
• higher value addition,
• reduced marketing margins,
• risk mitigation
• and ancillary activities,

I am confident we will achieve the targeted doubling of farmers’ income. I am happy to note that Dr. M.S. Swaminathan, the doyen of Indian agriculture, seems to agree. He wrote to me after the budget expressing gratitude for the farmer-centric budget. He welcomed the income orientation given to farming. He went on to say, and I quote,

“On the whole, the budget has tried to be as pro-farmer as possible subject to the limitation of resources. Seeds have been sown for agricultural transformation and for attracting and retaining youth in farming. The dawn of a new era in farming is in sight.”

Let me now turn to some of the programmes and policies that underpin our growth. As I have said before, my goal is ‘Reform to Transform’: the aim of reform is to transform the lives of ordinary people. Let me start with administrative reforms and our focus on execution.

In a country like India, resources are scarce, while problems are abundant. An intelligent strategy is to optimize use of resources through efficiency in implementation. Mere announcement of policies, or so-called policies, achieves little. Even more than reformed policies, we need transformed execution. Let me illustrate. The National Food Security Act was passed in 2013 but remained without implementation in most states. In the Mahatma Gandhi National Rural Employment Guarantee Scheme, much of the expenditure was leaking out to touts, middlemen and the non-poor, though expenditure was recorded in the books.

We are now implementing the Food Security Act nationwide. We have drastically reduced leakages in the Employment Guarantee scheme and ensured that money reaches those for whom it is intended. We have focused on creating durable assets that benefit the population, rather than the touts. And instead of talking about the virtues of financial inclusion, we have actually completed the task and brought over 200 million people into the banking system.

Our record on implementation in general, and reduction in corruption in particular, is now well understood. So I will be brief. Coal, minerals and spectrum have been auctioned transparently raising large amounts. Managerial improvements have resulted in elimination of the power shortage, a record high in highway construction per day and record port through-put. We have launched a number of new programmes across various sectors. Many legacy issues have been solved. The number of stalled projects has declined. The long-closed Dabhol power plant is operational again thanks to our coordinated efforts, and is generating power, saving jobs and avoiding bad debts for the banks. Let me now turn to policy reforms. I have referred to the durable reduction in inflation since this Government took office. This is partly attributable to bold measures taken to strengthen monetary policy. Last year, we entered into a Monetary Framework Agreement with the Reserve Bank of India.

This year we have introduced in the Finance Bill, amendments to the Reserve Bank of India Act. Under these amendments, the RBI will have an inflation target and will set monetary policy through a Monetary Policy Committee. The committee will have no members from the Government. Through this reform, monetary policy will acquire an inflation focus and a level of institutional autonomy unprecedented in major emerging markets, and greater than several developed countries. Together with our adherence to the path of fiscal consolidation, this is a testimony to our strong commitment to macro-economic prudence and stability.

Another major policy reform is in the petroleum sector. Under the new Hydrocarbon Exploration Licensing Policy, there will be pricing and marketing freedom and a transparent revenue-sharing methodology. This will eliminate many layers of bureaucratic controls. For on-going projects which have not been developed, we have also given marketing and pricing freedom, subject to a transparent ceiling based on published import parity prices. For renewal of existing Production Sharing Contracts, we have introduced a transparent method involving a flat percentage increase in Government profit share. This removes discretion and uncertainty.

Parliament has passed the Real Estate Regulation Act which will go a long way in transforming the real estate market, protecting buyers and promoting honest and healthy practices. Along with the passing of this long pending bill, we have introduced tax incentives for developers and buyers of housing for the neo-middle class and the poor.

The UDAY scheme in the power sector has permanently changed the incentive structure for State Governments. Ambitious operational targets are backed by credible incentives to perform.

Under this scheme, in a phased manner, State Governments will have to take over losses of distribution companies and count them against their fiscal deficit targets. This imposes a hard budget constraint on the states. It creates a powerful incentive for states to manage the electricity sector efficiently. Already nine states accounting for over forty per cent of the total debt of distribution companies, have entered into Memoranda of Understanding with the Central Government. Another nine have agreed to do so.

You are probably aware of this government’s sweeping policy reforms in renewable energy. From an average of less than 1500 Megawatts of solar capacity addition per annum, we are moving up to 10,000 Megawatts per annum. When I announced a target of 175 Gigawatts of renewables, as a pillar of our climate change strategy, many were surprised and some were skeptical. Yet, this month the International Energy Agency has reported that a surge in renewables has already halted global growth in energy-related carbon emissions.

Parliament has recently passed a new law on inland waterways which will enable the rapid development of this efficient mode of transport. This will increase the number of navigable waterways from 5 to 106.

Foreign Direct Investment policy has been transformed by allowing investment in hitherto closed sectors like Railways and Defence, and enhancing investment limits in insurance and many other sectors. These reforms are already bearing fruit. Two new locomotive factories involving an investment of over 500 billion dollars are being built in Bihar, by GE and Alstom. In insurance, 9600 crore rupees, approximately 150 million dollars of FDI, in 12 companies, from leading global insurers has already been approved.

We have enhanced the limits for foreign investment in stock exchanges and allowed them to be listed. I am sure, you are aware, of the reforms we have undertaken to promote private equity venture capital, and an eco-system for start-ups. I note that this ‘new economy’ is the focus of your panel discussions.

Finally, let me turn to the major steps we have taken in the area of generating employment. This is one of my highest priorities. India is a capital scarce, labour abundant country. Yet, the corporate tax structure has favoured capital intensive production. Tax benefits like accelerated depreciation, and investment allowance have created an artificial bias against labour. Labour regulations have also tended to promote informal employment without social protection, rather than formal employment. We have taken two important steps to change this.

Firstly, if any firm subject to tax audit increases its work force, it will get a 30 per cent weighted tax deduction on the extra wage cost for three years. Earlier, such a benefit was available only to very few industrial employers and had so many restrictions that it was practically ineffective. It will now cover all sectors including services, for employees with a salary up to 25,000 rupees per month.

Secondly, the Government has taken the responsibility for paying pension contributions for three years for all new persons enrolling in the Employee Provident Fund. This will apply to those with wages up to 15,000 rupees per month. We expect lakhs of the unemployed, and the informally employed, to benefit from these steps.

In a reform to eliminate corruption in government recruitments, we have abolished interviews for lower and middle level positions. They will now be filled on the basis of transparent examination results.

You are aware that results of Government entrance examinations for engineering and medical colleges are being used by private colleges also. I am happy to announce one more measure to improve the labour market and benefit the unemployed. The Government and Public Sector Undertakings conduct a number of recruitment examinations. So far, the scores in these examinations have been retained by the Government. Hereafter, we will make available the results and the candidate information openly to all employers, wherever consent is given by the candidate. This will create a positive externality. It will provide a rich data base which can be used by private sector employers as a ready-made and objective sourcing and screening mechanism. It will reduce search costs in the labour market for both employers and employees. It will enable better matching of candidates from labour surplus areas with jobs in other regions.

You may be aware of the spectacular progress of the Pradhan Mantri Mudra Yojana. Over 31 million loans have been sanctioned to entrepreneurs for a total value of nearly 19 billion dollars this year. You will be pleased to know that 77 per cent of these entrepreneurs are women and 22 per cent of them are from the Scheduled Castes and Scheduled Tribes. Even if we assume conservatively that on average, each enterprise creates just one sustainable job, this initiative itself amounts to 31 million in new employment. The Stand-Up India scheme will also provide 250,000 entrepreneurship loans to women and Scheduled Castes and Scheduled Tribes.

My government’s measures on skill development are well known. In the Budget, we also announced two path-breaking reforms in the education sector, which I want to elaborate upon. Our aim is to empower higher educational institutions to help them attain the highest standards. To start with, we will provide an enabling regulatory architecture to ten public and ten private institutions, so that they emerge as world-class teaching and research institutions. Their regulatory framework will be separate from existing structures like the University Grants Commission and All India Council for Technical Education. They will have complete autonomy on academic, administrative and financial matters. We will provide additional resources for the next five years for the ten public universities. This will eventually allow ordinary Indians affordable access to world-class degree courses. This initiative is the beginning of a journey to restore the original mandate of higher education regulators.

They should be facilitators and guides, driven by norms of self-disclosure and transparency, instead of top-down command and control. Eventually, through regulatory reform, we aspire to world-class standards in all colleges and universities.

Another initiative is in school education. We have achieved much quantitative progress in access and pupil-teacher ratios. The foundation of today’s knowledge economy is the quality of its school leavers. We have now decided that the quality of learning outcomes will be the Government’s primary objective. Accordingly, we will allocate an increasing share of resources under the Sarva Shiksha Abhiyaan to quality. These funds will be used to promote local initiatives and innovations to improve learning outcomes. I am sure, all of you who are parents and all of you who are employers, will welcome these steps in higher and school education respectively.

In conclusion, Ladies and Gentlemen, we have initiated many steps. Many more lie ahead. Some have begun bearing fruit. What we have achieved so far, gives me the confidence that, with the support of the people, we can transform India.

I know it will be difficult.
But I am sure it is do-able.
And I am confident, it will be done.