People’s welfare through financial inclusion and economic development primary concerns of Govt: FM
PRANAB MUKHERJEE URGES STATE GOVERNMENTS TO MAKE OPTIMAL USE OF CENTRAL SCHEMES
Following is the text of the inaugural address by Finance Minister, Shri Pranab Mukherjee at the meeting of the Union Finance Secretary with the Financial Commissioners/ Principal Secretaries (Finance)/Finance Secretaries of the States and Union Territories held here today:
“I address this gathering of the State Finance Secretaries at a crucial juncture when the economy is showing the initial signs of recovering from the global financial crisis and economic slowdown that started in September, 2008. To meet the challenges posed by the global economic slowdown the Central Government had taken several initiatives. However, the imperatives of addressing the economic crisis should not make us ignore the longer-term agenda of addressing fiscal stability and providing welfare to our people. I have aimed at having a consultative process with the State Governments to enable exchange of ideas on important policy issues faced by the Government. Today’s meeting is also aimed at exchange of ideas on the major agendas of growth.
One such agenda relates to adoption of a fiscal ‘rules based’ regime for the Centre and the States. Fiscal consolidation commitments across all levels of governments look to be fully entrenched with most of the States enacting Fiscal Responsibility and Budget Management Legislations, besides the Central Legislation. The consolidated fiscal position of the State Governments has witnessed significant improvement in recent years reflecting the higher share in Central transfers as a follow-up of the recommendations of the Twelfth Finance Commission, States’ own efforts at revenue augmentation, rationalization of revenue expenditure and the cyclical upturn in the global economy till 2008 that had a ripple effect on State finances.
States Governments recorded a revenue surplus of 0.6 per cent in 2006-07 for the first time since 1986-87 after a gap of almost 20 years. Faced with the global financial crisis, the States were thus on a relatively solid ground with some fiscal space and accordingly were given additional allocation of open market borrowings equivalent to 0.5 percentage point of the Gross State Domestic Product (GSDP) as a part of the second fiscal stimulus package over and above the mandated 3 per cent during 2008-09. This additional fiscal space was to be utilized for making capital investments.
It is expected that once the global economy begins to recover, the State governments would re-affirm their commitment to fiscal responsibility and be back onto the path of fiscal consolidation.
The next important issue that closely impinges upon the welfare of our people is the matter of achieving effective financial inclusion. This is important as a strategy of economic development to ensure the benefits of economic growth are equitably shared. We need to create economic opportunities while ensuring equal access to them for growth to be inclusive. The Eleventh Plan Document states that ‘the development of rural India is an imperative for inclusive and equitable growth and to unlock huge potential of the population that is presently trapped in poverty with its associated deprivations’. In this context, all regions and sectors where exclusion is high require an integrated approach towards provision of financial and economic support. For instance we see that despite the expansion of banking network in the country, there are still some areas that remain unbanked and under- banked. All these areas are being identified and banking facilities made available at the earliest, for which the support of the State governments in provision of infrastructural facilities, connectivity and a secure environment cannot be overemphasized.
In addition to this, the role of the States in facilitating bank credit linkages for landless farmers, oral lessees, marginal farmers, taking the lead in promoting Self Help Group Federations, building capacities of the cooperative institutions and the regional rural banks, and taking the lead in spreading financial literacy will all go a long way towards building an integrated approach to financial inclusion.
State Government field level functionaries are the vital stakeholders for the success of the financial inclusion process. Ground level government functionaries need to be sensitized in this regard.
Now I come to Investment in Infrastructure. Lack of adequate infrastructure remains the bane of our economy, seriously impacting our competitive edge in the global economy. The Eleventh Five Year Plan has set an ambitious target of increasing total investment in infrastructure from around 5% of GDP in the base year of the Plan 2006-07 to 9% by the terminal year 2011-2012. As the huge investment requirements for infrastructure development cannot be met entirely from budgetary resources of both the Centre and the States, therefore, the Public-Private-partnership (PPP) model of infrastructure development is being encouraged. The Central Government during the past few years have taken several initiatives to promote PPPs. The State Governments should consider the PPP model for implementing various infrastructure projects. Towards this end there is need to create enabling environment by way of a suitable policy framework and create a shelf of PPP projects which could be taken up for financing.
Speaking of Bank Credit, large variations in the Credit Deposit ratios are seen between the States. While there are a number of factors responsible for low Credit Deposit ratio in a State as compared to other States and the banks on their part are responsible for credit disbursement, State Governments would be required to give a commitment for creation of identified infrastructure besides creating an enabling environment for banks to lend and to recover their dues.
In this context, the forum of the SLBC i.e. the State Level Bankers’ Committee is very important for the State Government from the point of view of ensuring effective implementation of Government schemes and initiatives, including tackling issues like improvement in Credit Deposit ratio of States/UTs and ensuring effective and better banking facilities in un-banked/under-banked areas of the concerned State/UT. It is observed that in States/UTs where the participation in SLBC meetings by the State Governments is active and at the highest level, there has been a significant improvement in credit flow in the banking sector of that particular State/UT.
Another area of primary concern is a slow progress of externally aided projects. Effective implementation of these projects not only benefits the areas of projects’ location, but also enhances our image abroad and with the multilateral financial agencies.
The common objective is to enhance the welfare of the people and economic development. While emphasizing prudential financial management for the State Governments and the Union Territories, I would urge the State/UT Governments to make optimum use of the schemes of the Government of India and ensure their timely contribution and release of funds for these schemes wherever required. I am sure that Finance Secretaries of State Governments, who are generally known to be seasoned and highly capable officers, will provide the lead in being effective bridges between the Centre and the States and also ensure prudent and effective management of State finance.”
The meeting was attended by Minister of State for Finance, Shri Namo Narayan Meena, Finance Secretary, Shri Ashok Chawla, Expenditure Secretary, Smt. Sushma Nath and other senior officers of the Ministry of Finance apart from representatives of the Finance Departments of the State and the UT Governments.
PRANAB MUKHERJEE URGES STATE GOVERNMENTS TO MAKE OPTIMAL USE OF CENTRAL SCHEMES
Following is the text of the inaugural address by Finance Minister, Shri Pranab Mukherjee at the meeting of the Union Finance Secretary with the Financial Commissioners/ Principal Secretaries (Finance)/Finance Secretaries of the States and Union Territories held here today:
“I address this gathering of the State Finance Secretaries at a crucial juncture when the economy is showing the initial signs of recovering from the global financial crisis and economic slowdown that started in September, 2008. To meet the challenges posed by the global economic slowdown the Central Government had taken several initiatives. However, the imperatives of addressing the economic crisis should not make us ignore the longer-term agenda of addressing fiscal stability and providing welfare to our people. I have aimed at having a consultative process with the State Governments to enable exchange of ideas on important policy issues faced by the Government. Today’s meeting is also aimed at exchange of ideas on the major agendas of growth.
One such agenda relates to adoption of a fiscal ‘rules based’ regime for the Centre and the States. Fiscal consolidation commitments across all levels of governments look to be fully entrenched with most of the States enacting Fiscal Responsibility and Budget Management Legislations, besides the Central Legislation. The consolidated fiscal position of the State Governments has witnessed significant improvement in recent years reflecting the higher share in Central transfers as a follow-up of the recommendations of the Twelfth Finance Commission, States’ own efforts at revenue augmentation, rationalization of revenue expenditure and the cyclical upturn in the global economy till 2008 that had a ripple effect on State finances.
States Governments recorded a revenue surplus of 0.6 per cent in 2006-07 for the first time since 1986-87 after a gap of almost 20 years. Faced with the global financial crisis, the States were thus on a relatively solid ground with some fiscal space and accordingly were given additional allocation of open market borrowings equivalent to 0.5 percentage point of the Gross State Domestic Product (GSDP) as a part of the second fiscal stimulus package over and above the mandated 3 per cent during 2008-09. This additional fiscal space was to be utilized for making capital investments.
It is expected that once the global economy begins to recover, the State governments would re-affirm their commitment to fiscal responsibility and be back onto the path of fiscal consolidation.
The next important issue that closely impinges upon the welfare of our people is the matter of achieving effective financial inclusion. This is important as a strategy of economic development to ensure the benefits of economic growth are equitably shared. We need to create economic opportunities while ensuring equal access to them for growth to be inclusive. The Eleventh Plan Document states that ‘the development of rural India is an imperative for inclusive and equitable growth and to unlock huge potential of the population that is presently trapped in poverty with its associated deprivations’. In this context, all regions and sectors where exclusion is high require an integrated approach towards provision of financial and economic support. For instance we see that despite the expansion of banking network in the country, there are still some areas that remain unbanked and under- banked. All these areas are being identified and banking facilities made available at the earliest, for which the support of the State governments in provision of infrastructural facilities, connectivity and a secure environment cannot be overemphasized.
In addition to this, the role of the States in facilitating bank credit linkages for landless farmers, oral lessees, marginal farmers, taking the lead in promoting Self Help Group Federations, building capacities of the cooperative institutions and the regional rural banks, and taking the lead in spreading financial literacy will all go a long way towards building an integrated approach to financial inclusion.
State Government field level functionaries are the vital stakeholders for the success of the financial inclusion process. Ground level government functionaries need to be sensitized in this regard.
Now I come to Investment in Infrastructure. Lack of adequate infrastructure remains the bane of our economy, seriously impacting our competitive edge in the global economy. The Eleventh Five Year Plan has set an ambitious target of increasing total investment in infrastructure from around 5% of GDP in the base year of the Plan 2006-07 to 9% by the terminal year 2011-2012. As the huge investment requirements for infrastructure development cannot be met entirely from budgetary resources of both the Centre and the States, therefore, the Public-Private-partnership (PPP) model of infrastructure development is being encouraged. The Central Government during the past few years have taken several initiatives to promote PPPs. The State Governments should consider the PPP model for implementing various infrastructure projects. Towards this end there is need to create enabling environment by way of a suitable policy framework and create a shelf of PPP projects which could be taken up for financing.
Speaking of Bank Credit, large variations in the Credit Deposit ratios are seen between the States. While there are a number of factors responsible for low Credit Deposit ratio in a State as compared to other States and the banks on their part are responsible for credit disbursement, State Governments would be required to give a commitment for creation of identified infrastructure besides creating an enabling environment for banks to lend and to recover their dues.
In this context, the forum of the SLBC i.e. the State Level Bankers’ Committee is very important for the State Government from the point of view of ensuring effective implementation of Government schemes and initiatives, including tackling issues like improvement in Credit Deposit ratio of States/UTs and ensuring effective and better banking facilities in un-banked/under-banked areas of the concerned State/UT. It is observed that in States/UTs where the participation in SLBC meetings by the State Governments is active and at the highest level, there has been a significant improvement in credit flow in the banking sector of that particular State/UT.
Another area of primary concern is a slow progress of externally aided projects. Effective implementation of these projects not only benefits the areas of projects’ location, but also enhances our image abroad and with the multilateral financial agencies.
The common objective is to enhance the welfare of the people and economic development. While emphasizing prudential financial management for the State Governments and the Union Territories, I would urge the State/UT Governments to make optimum use of the schemes of the Government of India and ensure their timely contribution and release of funds for these schemes wherever required. I am sure that Finance Secretaries of State Governments, who are generally known to be seasoned and highly capable officers, will provide the lead in being effective bridges between the Centre and the States and also ensure prudent and effective management of State finance.”
The meeting was attended by Minister of State for Finance, Shri Namo Narayan Meena, Finance Secretary, Shri Ashok Chawla, Expenditure Secretary, Smt. Sushma Nath and other senior officers of the Ministry of Finance apart from representatives of the Finance Departments of the State and the UT Governments.
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