Scoop: First draft of PM's 'Money doesn't grow on trees' speech

Firstpost has managed to lay its hands on what it believes is the original draft copy of the Prime Minister’s address to the nation on Friday night. Our source, who is a friend of a friend of a sweeper at 7 Race Course Road, says he found a crumpled copy of his draft speech with blue pencil marks over several words and phrases, presumably made by the PM’s editorial boss at 10 Janpath. Disclosure: We cannot vouch for the authenticity of the crumpled draft speech, since the PMO declined to confirm or deny. (“It is not our job to confirm or deny rumours”, the spokesman said). But the draft makes for interesting reading anyway. The sentences and phrases in italics are those we found with blue pencil marks. Read on. (The final draft, the one the PM actually read out, is here.) My dear brothers and sisters, Soniaji and Rahul baba I am speaking to you tonight to explain the reasons for some important economic policy decisions the government has recently taken. Some political parties, especially Mamataji and the BJP, have opposed them. You have a right to know the truth, something we do rarely, about why we have taken these decisions. As you know, I prefer silence to speech, but Soniaji asked that I should put her truth in better light, and I shall do it now. No government likes to impose burdens on the common man. Our government has been voted to office twice to protect the interests of the aam aadmi, even if it damages the economy. At the same time, it is the responsibility of the government to defend the national interest, and protect the long-term future of our people. When the interests of the party conflict with that of the nation, we sometimes have to choose the nation. This means that we must ensure that the economy grows rapidly enough and that this generates enough productive jobs for the youth of our country. And we have to do this in the next six months to pay for all that the Congress party plans to spend in the next budget to help the aam aadmi vote for us in the next general elections. Rapid growth is also necessary to raise the revenues we need to finance our programmes in education, health care, housing and rural employment. In recent months our policies have ended up slowing growth and reducing jobs. Entire industries are in trouble, from telecom, to power to coal to aviation and real estate – to name just a few. So how can jobs grow? We can’t keep the entire population on NREGA. The challenge is that we have to do this at a time when general elections are due in less than 20 months and the world economy is experiencing great difficulty. The United  States and Europe are struggling to deal with an economic slowdown and financial crisis. Even China is slowing down. If that wasn’t the case, we could have asked them to lend us more money at least till 2014. We too have been affected, though I believe we have been able to limit the effect of the global crisis. But we too are struggling just like them without a clue. We are at a point_, as we were for the last three years,_ where we can reverse the slowdown in our growth.  We need a revival in investor confidence domestically and globally as we are bankrupting ourselves both at home and abroad. Both the fiscal deficit and the current account deficit are unsustainably high. The decisions we have taken recently are necessary for this purpose – and to save our skins. Let me begin with the rise in diesel prices and the cap on LPG cylinders. We import almost 80 percent of our oil, and oil prices in the world market have increased sharply in the past four years. We did not pass on most of this price rise to you, on Soniaji’s advice, so that we could protect you from hardship to the maximum extent possible, even though I knew it was simply unaffordable. As a result, the subsidy on petroleum products has grown enormously. It was Rs 1,40,000 crore last year.  If we had not acted, it would have been over Rs 200,000 crore this year. It could be worse if oil prices harden in the wake of the rising global liquidity following the US Fed’s QE-3, and the European Central Bank’s unlimited bond-buying plans. Where would the money for this have come from? Money does not grow on trees. But in 2004-08, when the global economy was booming and our tax revenues were buoyant, our party thought, wrongly, that money does grow on trees. Now we know this was a mistake. If we had not acted, it would have meant a higher fiscal deficit, that is, an unsustainable increase in government expenditure vis-a-vis government income. We should have done this three years ago, but it’s never too late. If unchecked, this would lead to a further steep rise in prices and a loss of confidence in our economy. It would have led to stagflation – a situation of rising prices and slowing or stagnant growth. The prices of essential commodities would rise faster, when they are already in double-digits.  Both domestic as well as foreign investors would be reluctant to invest in our economy. Interest rates would rise.  Our companies would not be able to borrow abroad. Unemployment would increase. [caption id=“attachment_464609” align=“alignleft” width=“380”] Firstpost has managed to lay its hands on what it believes is the original draft copy of the Prime Minister’s address to the nation on Friday night. AFP[/caption] All this has partially happened, and we have had to act to prevent converting the crisis into a full-blown disaster. The last time we faced this problem was in 1991. Nobody was willing to lend us even small amounts of money then. You know how hard I worked then to rescue the economy under the silent encouragement of Sonia Gandhi. We came out of that crisis by taking strong, resolute steps under the wise leadership of Narasimha Rao. You can see the positive results of those steps. We are not in that situation today, but we must act before people lose confidence in our economy fully. I hope we are not too late in this. I know what happened in 1991 – it was the result of overspending in the Rajiv Gandhi and VP Singh years - and I would be failing in my duty as Prime Minister of this great country if I did not take strong preventive action at least now. I have failed in the last three years, but I don’t want to retire from office a complete failure. The world is not kind to those who do not tackle their own problems. Many European countries are in this position today. They cannot pay their bills and are looking to others for help.  They are having to cut wages or pensions to satisfy potential lenders. I am determined to see that India will not be pushed into that situation, though we are nearly there. But I can succeed only if I can persuade you and our party high command to understand why we had to act. We raised the price of diesel by just Rs 5 per litre instead of the Rs 17 that was needed to cut all losses on diesel. We should have deregulated diesel pricing in stages, but our party cares too much for the aam aadmi to do that. Much of diesel is used by big cars and SUVs owned by the rich and by factories and businesses. It is also used by the aam aadmi’s buses and trucks that carry essential commodities, and by farmers using diesel pump-sets. Should government run large fiscal deficits to subsidise them? We reduced taxes on petrol by Rs 5 per litre to prevent a rise in petrol prices. We did this so that the crores of middle class people who drive scooters and motorcycles are not hit further. We also wanted to balance the diesel hike with a petrol cut to sell the idea to our own party and to Mamata Banerjee who was so upset about the petrol hike last year. If I had known she would be quitting the UPA, I may not have done this. On LPG, we put a cap of six subsidised cylinders per year. Almost half of our people, who need our help the most, actually use only six cylinders or less since they do not have enough to eat, and thus need to cook less than others. We have ensured they are not affected. Others will still get six subsidised cylinders, but they must pay a higher price for more, nearly double the amount. We did not touch the price of kerosene which is consumed by the poor and is anyway sold on the blackmarket. We don’t want the poor who buy from the blackmarket to be affected further by raising prices. My Dear Brothers and Sisters, You should know that even after the price increase, the prices of diesel and LPG in India are lower than those in Bangladesh, Nepal, Sri Lanka and Pakistan. I don’t want to compare prices in the US, since we will then be shown to be taxing these fuels more than the richest country in the world. To keep consumption in check, we need to tax oil more than the US. The total subsidy on petroleum products will still be Rs  1,60,000 crore. This is more than what we spend on health and education together. We held back from raising prices further because I hoped that oil prices would decline. But we have been doing this for eight years, and we finally had to do something. Let me now turn to the decision to allow foreign investment in retail trade.  Some think it will hurt small traders. This is not true. How can you hurt people who are already hurting badly due to the slowdown? Organised, modern retailing is already present in our country and is growing. Many of our big industrialists are already in this business, and they want to be bailed out with money from foreign players. All our major cities have large retail chains. Our national capital, Delhi, has many new shopping centres, and many of them are losing money and they need to be rescued with foreign capital. But it (Delhi) has also seen a three-fold increase in small shops in recent years. When unemployment is still high, people start small kirana shops to become self-employed. This is the reason for their growth. In a growing economy, there is enough space for big and small to grow. The fear that small retailers will be wiped out is completely baseless. If growth slows, there will be more small vendors who will have to fend for themselves. We should also remember that the opening of organised retail to foreign investment will benefit our farmers. According to the regulations we have introduced, those who bring FDI have to invest 50 percent of their money in building new warehouses, cold-storages, and modern transport systems. They are not barred from doing so even now, but they will not do so unless we allow them to open big retail stores as well. This will help to ensure that a third of our fruits and vegetables, which at present are wasted because of storage and transit losses, actually reach the consumer. We know Verghese Kurien, father of the White Revolution, did this with milk retailing long before Wal-Mart came here. But he is no more. We hope Wal-Mart will do with vegetables and fruits what Kurien did with milk decades ago. Moreover, as you know, a large part of our rice and wheat buffer stocks also get eaten by rats. Wastage will go down; prices paid to farmers will go up; and prices paid by consumers will go down. We hope Wal-Mart and other big retailers will do what the Food Corporation of India has not been able to do despite huge subsidies. The growth of organised retail will also create millions of good quality new jobs – as cash counter-boys and girls and barcode labellers and other back-end stuff. We can, as a former British colony, become a nation of helpers of shopkeepers. We recognise that some political parties – and some of our own party people - are opposed to this step. That is why state governments have been allowed to decide whether foreign investment in retail can come into their state. But one state should not stop another state from seeking a better life for its farmers, for its youth and for its consumers. This also shows that we are true federalists when it comes to welcoming foreigners in big retail. In 1991, when we opened India to foreign investment in manufacturing, many were worried. But today, Indian companies are competing effectively both at home and abroad, and they are investing around the world. Some say they prefer to invest abroad rather than in India. I hope to change that by showing that if foreigners like Wal-Mart can invest here, you can too. More importantly, foreign companies are creating jobs for our youth – in information technology, in steel, and in the auto industry. I am sure this will happen in retail trade as well. My Dear Brothers and Sisters, The UPA government is the government of the aam aadmi. Our definition of aam aadmi is inclusive: it includes everyone who does not own SUVs and waste diesel subsidies. In the past eight years our economy has grown at a record annual rate of 8.2 percent, but this average is going to come down drastically before 2014.  We have ensured that poverty has declined much faster, agriculture has grown faster, and rural consumption per person has also grown faster. But our borrowings and fiscal deficits have grown even faster, which is why the Indian economy is in trouble, deep trouble. We need to do more, and we will do more, or else we have had it. But to achieve inclusiveness and get re-elected we need more growth. And we must avoid high fiscal deficits which cause a loss of confidence in our economy and ruin our welfare spending plans. I promise you that I will do everything necessary to get our aam aadmi party re-elected and put our country back on the path of high and inclusive growth. But I need your support to get Rahul installed as the next PM. He can’t do this on his own, as you say in UP.  Please do not be misled by those who want to confuse you by spreading fear and false information. The same tactics were adopted in 1991. They did not succeed then because we abandoned reforms after 1993 when we lost a few state elections. They will not succeed now, for we will do the same after six months. I have full faith in the wisdom of the people of India and not elect our opposition parties. We have much to do to protect the interests of our nation, and we must do it now.  At times, or at least once in eight years, we need to say “No” to the easy option and say “Yes” to the more difficult one. This happens to be one such occasion. The time has come for hard decisions. For this I need your trust, your understanding, and your cooperation. And your vote in 2014. As Prime Minister of this great country, I ask each one of you to strengthen my hands and that of the Congress party so that we can take our country forward and build a better and more prosperous future for ourselves and for the generations to come. If we don’t do that, the India Story will die and our elections prospects will be poor. Jai Congress. Jai Hind.