New Delhi

“My Fellow Citizens,

I wish you all a peaceful, productive and secure New Year.

New Year’s Day is a day of resolutions. Each of us makes our own resolutions – to live a healthier life, to live a more honest life, to live a better life and to live a happier life. I sincerely hope in the New Year we can all work together with a new resolve: to make our homes and neighbourhood, our village or town, and our nation a better place to live in.

If each of us works towards that end, we can be sure that we are also making the world a better and a safer place.

The year that has just ended was a very difficult year for the world. Economic crises, socio economic tensions, political upheavals in many developing countries and political deadlock in some of the developed countries, all cast their shadow on 2011. A ‘revolution of rising expectations’, fostered by the extraordinary reach of the electronic media and the connectivity provided by new social networking platforms, has kept Governments around the world on their toes.

We in India have had our share of problems.

The Indian economy slowed down and inflation edged up. Concern about corruption moved to the centre stage.

We must not be too downcast at these events. All countries and economies go through cycles. We must remember that downturns are followed by upturns. Indeed, they are often a test of our ability to respond to new challenges.

The task before us is clear. We must address the new concerns that have arisen while remaining steadfast in our commitment to put the nation on a development path which ensures rapid, inclusive and sustainable growth. I want to assure you all on this New Year’s day that I personally will work to provide an honest and more efficient government, a more productive, competitive and robust economy and a more equitable and just social and political order.

I believe we have made more progress than is commonly realised. I am personally delighted that Government was able to introduce the Food Security Bill and the Lok Pal and Lok Ayukta Bill in Parliament. The Lok Pal and Lok Ayukta Bill was passed by the Lok Sabha. It is unfortunate that the Bill could not be passed in the Rajya Sabha. However, our Government is committed to the enactment of an effective Lok Pal Act. Taken together with the Right to Information Act, the National Rural Employment Guarantee Act and the Right to Education Act, these are legislative legacies that generations of Indians will come to value, appreciate and benefit from.

Friends,

On this New Year’s Day I do not wish to dwell on the year gone by. Instead, I would like to focus instead on the challenges of the future, so that we can all work together to over come them.

Our biggest challenge today remains that of banishing poverty, ignorance and disease. Simultaneously, we must work to build an India that holds the promise of prosperity to the many millions of our people who are just beginning to emerge out of poverty. We must remain focused on this fundamental task in the Twelfth Plan period which begins in 2012-13.

As I look ahead I see Five Key Challenges facing the nation. To meet these challenges we need the concerted efforts of the central government, the state governments, political parties and indeed all concerned citizens.

First, there is the urgent challenge of eradicating poverty, hunger and illiteracy and providing gainful employment to all. I call this the challenge of Livelihood Security.

There are many steps we need to take to address this challenge and of these, the most important is to empower every citizen with the light of education. I say this with the deepest conviction because I know what education did for me.

I was born into a family of modest means, in a village without a doctor or a teacher, no hospital, no school, no electricity. I had to walk miles every day to go to school, but I persevered and was fortunate to be able to secure a high school education, and then go on to higher education. It is this access to education that transformed my life and gave me new opportunities which others with my background could not dream of.

I firmly believe that educating our children, providing them with employable skills, while also ensuring their good health, must be our first and primary task. There is no better investment we can make in the future – the future of our children, of our families, of our communities, and of our nation.

Along with education and affordable health care, we must also generate a growth process that can provide gainful employment to all. This is the only way that we can wipe out poverty in a sustainable fashion.

However, since many elements of this strategy will take time to bear full fruit, we must in the meantime pay urgent attention to the needs of those who need immediate support. It is for this reason that the government has taken steps to provide minimum employment and access to food to those who need it most.

I believe that the initiatives we have taken to invest in education and health, provide an employment guarantee and also provide food security, constitute a robust response to the challenge of providing greater Livelihood Security for our people.

My Fellow Citizens,

The second challenge that demands our attention is Economic Security. Economic security comes from having an economy that can produce the material output required to achieve desired consumption levels for the people and one that can generate the productive jobs needed to satisfy the aspirations of the workforce. To reach this level we will have to ensure rapid growth accompanied by adequate job creation. Rapid growth is also necessary to generate the revenues we need to finance our livelihood security programmes.

The process of economic reforms was initiated in the mid eighties and accelerated the 1990s precisely to accelerate our growth potential. Because of our democratic system, the reforms were introduced gradually to begin with, in order to garner broad based support. That we succeeded in this objective is evident from the fact that successive governments of different political complexions at the centre, and many governments belonging to different political parties in the states, have more or less pushed in the same direction. However, this gradualist pace also meant that the full effects of the reforms took time to have effect.

Yet, the fruits of this effort have been amply evident in the past several years. The average growth rate of the economy was around 4 % per year before the 1980s. It increased to an average of about 8 % since 2004.

Although we have every reason to be satisfied with this performance, it would be wrong to conclude that India is now unshakeably set on a process of rapid growth. Our growth potential is indeed established. But there are many challenges we have to face if we want to maintain this growth in the years ahead, as indeed we must.

To achieve sustained rapid growth we need to do more than halt the current slowdown though that is certainly the first step. We need to usher in a second agricultural revolution to ensure sufficient growth in rural incomes. We also need to usher in the many reforms needed to trigger rapid industrialisation and to build the infrastructure which such industrialisation needs.

Rapid growth will also bring structural change, notably in the rate of urbanisation. Our urban population is expected to grow from 380 million at present to 600 million by 2030. We must be able to provide productive jobs in the non agricultural sector for this expanding urban population and we must also be able to expand our urban infrastructure to deal with the expected expansion of the urban population.

In 1991 when we liberated our economy from the shackles of the Licence-Permit Raj, our main objective was to liberate the creativity of every one of our citizens from the deadweight of bureaucracy and corruption. Today’s youth, born in the 1980s and later, would have no memory of the kind of corruption that the regime of controls and permits had created. To get a railway ticket or a telephone connection you had to bribe someone. To buy a scooter you had to bribe someone to jump the queue!

However, even as the creative energies of our people have been unleashed and old forms of corruption have vanished, new forms of corruption have emerged which need to be tackled. Elimination of corruption is critical to support genuine entrepreneurship. It is also the demand of the ordinary citizen who encounters corruption all too often in everyday transactions with those in authority.

This is a serious problem that calls for a multi-dimensional response.

New institutions such as the Lokpal and the Lokayuktas are an important part of the solution and we have initiated the process for establishing them. But this is only one part of the solution. We also need reforms in systems of government which would increase transparency and minimise discretion so that the scope of misgovernance is reduced. We have taken several steps in this regard. We have introduced in Parliament a Bill on Citizen’s Charters which will empower citizens to demand services at appropriate standards from government departments. We have introduced a Bill on Judicial Accountability.

These initiatives will take time to have their full effect and we must therefore be patient. But I do believe they are transformational initiatives, which will be recognised as such a few years down the line.

A critical element in ensuring economic security and prosperity is the need for fiscal stability. India has paid a heavy price in the past for fiscal profligacy. Many of us can recall the dark days of 1990-91 when we had to go around the world begging for aid. Fortunately we were able to overcome the problem fairly quickly and for most of the past two decades we have been able to hold our head high, because we have managed our fiscal resources well. We must ensure that the country does not go down that road once again.

I am concerned about fiscal stability in future because our fiscal deficit has worsened in the past three years. This is mainly because we took a conscious decision to allow a larger fiscal deficit in 2009-10 in order to counter the global slowdown. That was the right policy at the time. But like other countries that resorted to this strategy, we have run out of fiscal space and must once again begin the process of fiscal consolidation. This is important to ensure that our growth process is not jeopardised and, equally important, our national sovereignty and self respect are not endangered.

The most important step for restoring fiscal stability in the medium term is the Goods and Services Tax. This would modernise our indirect tax system, increase economic efficiency and also increase total revenues. Another important step is the phased reduction in subsidies. Some subsidies, such as food subsidies are justifiable on social grounds and are expected to expand once the Food Security bill becomes operational. But there are other subsidies that are not and these must be contained.

Some of the reforms needed for economic security attract controversy and cause nervousness. This is understandable, but we should learn from our past experience with reforms. Things that we take for granted today caused similar controversy twenty years ago. We should remember that change is necessary for development and while we must anticipate change, and even protect the most vulnerable from ill effects, we should not lock ourselves into a blind refusal to contemplate change. If we have confidence in ourselves, we will be able to meet any challenge.

Friends,

The third challenge we face, is the challenge of Energy Security. Energy is an essential for development because higher levels of production inevitably involve larger energy use. Our percapita energy levels are so low that we need, and must plan for, a substantial growth in energy availability.

The energy security challenge is particularly great for India because we are trying to develop in an environment in which our domestic energy resources are limited and the world is transiting to a period when energy is likely to be scarce and energy prices are expected to be high.

As a first step, we must ensure effective utilisation of all available domestic energy resources. Unfortunately, our attempt to tap both old and new sources of energy is being threatened by a range of problems. Be it coal or hydro power, oil or nuclear power we find new challenges that have to be overcome to develop these resources to the fullest extent possible. We must re-examine all domestic constraints on such development to see how they can be overcome.

The domestic agenda for energy security is clear. We need new investment in established sources of energy such as coal, oil, gas, hydro electricity and nuclear power. We also need investment in new sources of energy, like solar and wind. Parallel with expanding domestic supplies, we need to promote energy efficiency to contain the growth of energy associated with rapid growth.

Both goals of expanding new investment and achieving energy efficiency require a more rational pricing policy, aligning India’s energy prices with global prices. This cannot be done immediately, but we need to outline a phased programme for such adjustment and then work to develop support for making the transition. I realise that this will not be easy, but unless we can achieve this transition we will not be able to promote energy efficiency as much as we should, and we will certainly not be able to attract enough investment to expand domestic energy supplies.

Energy security also has a global dimension. Even with the best domestic effort our dependence on imported energy is expected to increase. We need assured access to imported energy supplies and also access to new energy related technologies. This means we need sensible policies that can promote economic partnership with countries that have energy resources and technologies. We also need a pro active foreign policy, protecting our access to such resources and to foreign technology.

A fourth important challenge we face in the years ahead is the challenge of ecological security. Economic growth is essential for the well being of our people, but we cannot allow growth to be pursued in a manner which damages our environment. We owe it to future generations to ensure that the environment they inherit from us is at least as capable of providing economic security for them as the one we inherited from our parents

We cannot allow the waters of our rivers to be polluted by untreated effluent and sewage. Yet this is happening today because of weak regulation and lack of enforcement over industry and the cities. Similarly, we cannot allow air pollution to proceed unabated promoting respiratory diseases which impose a heavy burden on large numbers of our people especially the poor.

Ecological security also involves protection of our forests which play a critical role not only in absorbing carbon emissions but also in providing us with water security. Forests help reduce water run off and siltation and increase water retention in the ground, recharging our underground acquifers. Some forest land often has to be surrendered to allow the exploitation of natural resources including energy and mineral resources and hydro electric potential. This must be done in a manner which minimises the extent of surrender and also provides sufficient compensatory afforestation to ensure ecological security to the nation.

All these problems can be solved and have been solved in other countries. It requires stronger and more transparent regulation and it also involves extra costs. These costs must be borne by those who pollute and this principle must be well understood and strictly enforced.

Looking beyond the immediate ecological issues, there is the larger challenge of climate change. As responsible citizens of the world we must pursue a pattern of development which reduces greenhouse gas emissions per unit of our GDP by about 20-25% by 2020 as our contribution to global ecological security. This objective is closely linked to the pursuit of rational energy policies mentioned earlier.

Dear Citizens,

Finally, and most importantly, our vibrant democracy faces threats to internal and external security which together can be viewed as the challenge of National Security.

Despite grave provocations from extremists and terrorists, the people of India have remained united. They have not lost faith in our plural, secular and inclusive democracy. Across the world people look to India for inspiration. Our model of Inclusive Growth in an Open Society inspires those who seek freedom from tyranny.

A new wave of democracy demanding the empowerment of ordinary people is sweeping the world and India stands tall as a functioning democracy. We are a nation of over a billion people, plural, secular, democratic – with all the great religions of the world freely practiced here, with so many languages and cuisines, so many castes and communities – living together in an open society. This is an achievement for which every Indian can be proud.

The world acknowledges this achievement. I do believe that the world wants India to succeed because India offers hope.

Our democracy has its faults, but our people are aware of them and have shown their ability to correct these faults.

Often democracy can be frustrating – both to those who are in government and to those who expect it to be more efficient, effective and humane. But our democracy is our strength. It is the basis of our unity. It is also the most important guarantor of internal security.

Equally important for our national security is the modernisation of our defence forces. Indeed, India’s economic and energy security also require this. Our Army, our Navy and our Air Force require modernisation and upgradation of personnel and systems. Ensuring this will remain my most important task as Prime Minister.

Dear Fellow Citizens,

Today I have shared my thoughts with you to make you understand the nature of the challenges we face entering a New Year.

I have identified Five key challenges facing us. These will be on top of our policy agenda this year - Livelihood Security (education, food, health and employment), Economic Security, Energy Security, Ecological Security and National Security.

In addressing each of these five challenges we must work together as a nation, while working with like-minded nations around the world.

I assure you that I will work with all the energy at my command to ensure that we meet each of these challenges and overcome them.

Let us stand united as a people in overcoming these challenges.

I wish you the best in the year and the years ahead.

Jai Hind!”