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Following is the text of the statement by the Finance Minister Shri P. Chidambaram, Leader of Indian Delegation (Representing the Constituency consisting of Bangladesh, Bhutan, India and Sri Lanka) at Development Committee Meeting in Washington D.C. on April 17,2005:
“We belong to a generation which has had the privilege of being part of the transition of mankind from one millennium to another. The global community stood as one at the UN summit of 2000, as 189 countries adopted the millennium declaration enshrining the Millennium Development Goals (MDGs). Today, while we have traversed one third of the distance, the fact is that we are already lagging in our tryst with the targets that we had set for achievement by 2015. It is thus time for us to build momentum; else we may arrive too late or, in the case of some countries, not arrive at all.
Global Economic Environment
We meet now after an encouraging recovery of the Global economy in 2004, characterized by robust growth, increased FDI, expansion in trade, and decline in external debt. Developing countries as a category grew at the fastest rate in two decades while output in the remaining economies in transition continued to increase more rapidly than in the other major groups.
In addition to the stimulus provided by the nascent United States recovery, China’s high growth rate is making an increasing contribution to global economic growth by increased demand for oil and non-oil commodities. Though overall prospects continue to be good, some global imbalances pose a potential threat, to which a coordinated response is required. The high level of private debt and the twin deficits in US together with sluggish economic upturn in Europe and Japan are of great concern at this time.
A modest deceleration in all regions is expected in 2005 as a cycle of monetary tightening causes interest rates to inch upward. The spike in oil prices in 2004, and the realization that oil price increases may persist over the next year have already slowed global growth and increased inflationary pressures. These factors are likely to reduce the stimulus of growth to many developing countries .The growth of international trade is also likely to be adversely affected.
Global Monitoring Report
Five crucial years have passed since the eight Millennium Development Goals were accepted as a global compact. This year’s Global Monitoring Report is aptly titled “Consensus to Momentum”. In taking stock, it is a moot point whether the world may already be too late in meeting the minimum targets.
MDGs are the most broadly supported, comprehensive, quantified and time bound poverty reduction targets accepted universally. We believe that MDGs are too important to fail. We have a shared resolve and commitment towards MDGs and firmly believe that they are attainable with concerted actions and mutual accountability of all development partners. We applaud the GMR finding that between 1990 and 2002, low-income countries significantly increased their spending on education and health.
The GMR (which has special focus on Sub-Saharan Africa) and the report on MDGs commissioned by the United Nations present a grim picture indeed. More than one billion people still live below the extreme poverty line of one dollar per day, and around 20,000 die from poverty each day. Overall global wealth has grown but is less evenly distributed within countries, within regions, and in the world as a whole. While overall poverty targets maybe achieved, there would still be vast areas, including sub- Saharan Africa where poverty, in fact, has increased.
We fully support the 5-point agenda for action: they are all relevant and important. But the issue before us is really not identification of new action points or targets; it is really an issue of carrying through the commitments already made, and of ‘walking the talk’. We are informed in para 1.37 of the GMR that at least a doubling of ODA will be needed within the next five years to support adequate progress toward the MDGs. We also recall the re-commitment at Monterrey to raise aid to 0.7% of GNI. I need not quote statistics which show how far the world is from even these modest targets.
The GMR rather euphemistically states that the overall increase in ODA from 2001 to 2003, has been US$ 16.7 billion. If, however, we look deeper into the composition of this increase, a fairly disturbing trend emerges:
· The single largest composition of this increase, is indirect, and is on account of Debt Relief. There is no denying the fact that debt relief frees up resources in the affected countries, making them available for development expenditure. However, there may not be a one to one correspondence between every dollar saved on account of debt forgiveness to a dollar invested in capital outlays on MDG-oriented programmes. The Medium Term Fiscal Framework embedded in PRSPs of these countries must ensure that an adequate proportion of what a country saves in debt relief is indeed channelized into development outcomes.
· Second, we note that Technical Cooperation comprised over US$ 4 billion in the total increase of US$ 16 billion in aid flows, while direct multilateral and bilateral aid contributed only US$ 1.8 billion. Given, the importance of training, capacity building and institutional reforms which are important inputs for effective aid utilization, it needs to be ensured through greater scrutiny and monitoring that this aid actually complements the `core’ aid provided for investments in infrastructure and MDG-targeted programmes. I can only hope that donors exercise a degree of balance in determining what really constitutes ODA and fund flows are accordingly directed.
Para 5.2 of GMR states that donors’ attention to geo-politically significant countries appears to be crowding out assistance to countries that need the most help in achieving the MDGs. While we sympathize and support aid to post-conflict societies and countries, we must clearly understand that what is needed to meet the MDGs has to be over and above aid channelized to post-conflict situations. This situation is exacerbated by the years of net negative disbursements by the multilateral development banks. We are aware of projections that IBRD lending would start rising progressively. However, we are also aware that realizing these projected increases would require substantive and effective steps towards addressing the financial and non-financial costs of doing business with the Bank.
Absorptive capacity of recipient countries should no longer be cited as a reason for slowing the scaling up of aid. The GMR states that a number of countries are well placed to manage a doubling of assistance in the short to medium term. Para 5.36 states that five large Asian countries (Bangladesh, India, Indonesia, Pakistan and Vietnam) could effectively absorb an immediate doubling or more of aid. These five countries also have over 60% of the global population subsisting below the poverty line. Further, absorptive capacity is neither static nor exogenous to aid, and aid can be instrumental in expediting the building up of capacity. So our concern is really the urgent need for all development partners to fulfill their respective commitments towards the MDGs.
Achieving MDGs in India
India as a country seems to be comfortably on track for meeting the MDG in terms of reducing poverty thanks to its high growth performance during the 1990s. We are aware that for India to meet the 2015 targets, an extraordinary effort will be required, especially in the poorest or “lagging” states, districts and certain communities (notably where there is a concentration of scheduled tribes). Although, India has had an average growth of about 6.3% over the last decade, the growth has been uneven, and regional disparities persist. Unless the effects of growth are spread to these lagging states, the targets for all India will be difficult to achieve. In achieving the human development outcomes captured in the MDGs (morbidity and mortality, nutrition, education), there has been notable success in some of the Indian states (for example child mortality in Kerala, malnutrition in Tamil Nadu, and school attendance in Himachal Pradesh), and this provides ample evidence that good outcomes can be achieved in India.
· Education and literacy are the weak links in the performance of the Indian economy. In terms of the gross enrolment ratio in primary education, the country is unlikely to achieve the MDG. However, this phenomenon is not uniform across the States.
· Another area of concern in India is gender equality, including gender equality in the primary and secondary school enrolment.
· Health also requires greater attention in India. Progress in reducing infant, child and maternal mortality during the 1990s has not acquired the required pace to achieve the MDGs in this regard.
· Although malaria does not seem to be a major killer disease any more in the country, TB and HIV - AIDS are becoming threats to public health.
· Progress on provision of drinking water in both rural and urban areas during the 1990s has been satisfactory in the country. It is in the provision of improved sanitation, however, that the progress has not been satisfactory in rural areas.
· However, in terms of housing, the country seems to be on track in urban areas but off the mark in rural areas.
From the data available it is evident that significant progress has been achieved by India in relation to poverty, health and education related indicators. Measured in terms of $ 1 per day, it is found nearly 26% of India’s population was below the poverty line in 2001. This is, nevertheless, a significant improvement over 1993-94 that showed 47 per cent of population below the poverty line, when measured in the same terms. Given the trend in economic growth during the Tenth Plan period (2002-2007), the poverty ratio is expected to decline further.
The Government of India (GoI) is doing its utmost to achieve a GDP growth rate in the range of 7-8 per cent per annum. The post 1991 reforms pursued by the Government have already put India on a high growth trajectory. We are now in the process of introducing “second generation reforms’. All these efforts would go a long way in raising the income levels of the people and hopefully in wiping out extreme poverty in India by 2015.
The combined expenditure on education, health and poverty alleviation of the Central Government and the States/ Union Territories has been increasing. The Government of India has been supplementing the developmental expenditures of the States in a big way in recent years to achieve targets that are very similar to Millennium Development Goals. We are committed to the achievement of MDGs and in this regard have taken the following initiatives:
· The public spending on health is being raised to at least 2-3% of the GDP with focus on primary health care. Accordingly, outlays of schemes for control of communicable diseases and the AIDS control programme have been enhanced.
· A National Rural Health Mission (NRHM) will now focus on strengthening primary health care through grass root level public health interventions based on community ownership. Components of this programme will include training of health volunteers, providing more medicines and strengthening the primary and community health centre system.
· The budgetary allocations for health have been increased by over 20% to about US$ 2 billion annually.
· Interventions which focus on child & maternal health are being strengthened. The coverage of the Integrated Child Development Services scheme is being universalized with a 30% increase in the number of anganwadi(child care) centres and the budgetary allocation has been doubled to US$ 700 million annually.
· The Education for All (Sarva Shiksha Abhiyan) programme – the cornerstone of the Government’s intervention in basic education for all children - has also been considerably enhanced with an outlay of US $ 1.8 billion annually.
· The Mid-day Meal Scheme now covers about 110 million school children across the country with an allocation of US$ 700 million annually.
· A Total Sanitation Campaign is in progress to ensure access to rural households in rural areas at a cost of US$ 150 million annually.
· Gender Budgeting has been introduced for the first time in India to highlight the gender sensitivities of the budget allocations.
Trade
The MDGs would be more within our grasp if we strive towards success in trade policy discussions and the Doha development agenda. The global community must aim at ambitious outcomes in its negotiations this year, and improved market access for developing countries will remain central to such outcomes. Agriculture is at the heart of the Doha negotiations and we must remain mindful of the food and livelihood security of large numbers of subsistence farmers in poor countries. We also need to give a greater impetus to liberalization of service exports in order to achieve balanced outcomes in the interest of all nations. The Bank should intensify its global advocacy role in promoting the interests of developing countries. It is uniquely placed to argue not just against the barriers to trade but also against the ‘barriers to development’ erected in several industrial economies which deny opportunities for faster growth in developing countries
Innovative Financing Facility
We find that the absence of substantial progress in infusing adequate amounts of additional ODA to meet the MDGs is prompting exploration of various innovative financing mechanisms. There may be merit in frontloading the aid flow for attainment of MDGs. However, it should be ensured that after the front-loading period, ODA does not fall below a pre-committed level. The aid flow should be through existing multilaterals to reduce the additional requirement of donor coordination and aid selectivity.
These innovative mechanisms still face several challenges. In addition to political acceptability in only a few donor countries, the issues of national accounting, and legislative and regulatory systems remain to be tackled. In this regard we note with interest that a concrete forward movement can be expected on a ‘pilot’ International Financing Facility for immunization (IFFIm).
19. We also commend the joint Fund-Bank effort in exploring feasible options of global taxation. While both the IFF and global taxation issues are still `work-in-progress’, we would urge all countries to keep an open mind on these pilots.
Infrastructure for Development
The central role of infrastructure in enhancing the growth prospects, accelerating poverty reduction and achieving the MDGs is well recognized. At present, there are large gaps in the availability and quality of key infrastructure, especially in low-income countries and in rural areas within countries. For achievement of MDGs, while it is essential to make programmatic interventions in human development sectors, it is equally important that infrastructure is given a focus to boost growth. Improved infrastructure by itself leads to growth and there is sufficient empirical evidence that points to linkages between infrastructure and many of the MDGs. For example, it has been estimated that a universal coverage of roads, electricity and sanitation is expected to result in a reduction of proportion of underweight children by at least 40% and IMR by 60%. The estimated association between improved physical infrastructure and education indicators is also encouraging.
There is a need for vastly increased investment in infrastructure in both low and middle-income countries and to reverse the trend of decline in public spending on infrastructure that was witnessed during the past decade. The close linkages between access to basic infrastructure and the human development, and hence to the achievement of the MDGs, has for too long been ignored and the cost of continued neglect would be catastrophic. Reduction in rates of child mortality cannot be achieved without improving access to safe drinking water and basic sanitation, roads that facilitate access to schools and hospitals; and electrification that improves efficiency of basic services.
Infrastructure is also fundamental to improving the investment climate and expanding private sector activity. Traditionally, public funding has constituted 70% of total spending on infrastructure while the private sector has contributed 20-25% and ODA has accounted for the remaining 5-10%. The Bank will clearly need to do much more if it has to respond to the needs of the developing countries in this area. Many countries including India are also pursuing innovative approaches of public-private partnership in infrastructure financing. We look forward to a useful role of the Bank in providing assistance and support for these initiatives. Earlier, we had welcomed the Bank’s Infrastructure Action Plan, which promised Bank’s re-engagement and substantial scaling up of infrastructure lending after a decade of neglect. The huge financing needs of the infrastructure sector, which are estimated to be of the order of 7% of GDP for all developing countries, indicate the enormity of the challenges that lie ahead. Improved infrastructure is critical for overall economic growth. Therefore, there is a need for significant step up of infrastructure lending by the Bank.
Voice
Democratic deficit in the governance of Bretton Wood Institutions needs to be addressed to enhance legitimacy, transparency, accountability and ownership of the decision-making process. Since Monterrey, we find that progress has been limited to and distracted by peripheral issues which are not central to enhancement of ‘voice’ in decision making.
We strongly urge gaining of ‘momentum’ towards tackling the central structural issue of voting power. The set of determinants presently used in computing the economic strength of the countries are not true reflection of economic realities and have tilted the Funds’ and Bank’s governance structure towards the developed countries. The major determinant for computing the country’s quota in the Fund and share in the Bank, GDP at market exchange rate, understates the GDP of developing countries. Similarly, it captures the European Intra Union trade data though they are in the same currency, something akin to domestic trade. We firmly believe that these anomalies should be rectified by changing the main determinant of IMF Quota and Bank’s Capital shares in GNI on PPP basis.
BSC/BY
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