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Updated: March 17, 2013 23:38 IST

Enhanced push for reforms coming

Sujay Mehdudia
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Illustration: P. Manivannan
Illustration: P. Manivannan

Commerce, Industry and Textiles Minister Anand Sharma has been credited with bringing forth a dynamic National Manufacturing Policy to shift the focus for employment generation from agriculture to manufacturing sector over the next five years. His tenure has seen several reforms in the foreign direct investment (FDI) policy, including multi-brand retail. But he is now faced with the difficult task of giving a new direction to the declining Indian exports while unveiling the new Foreign Trade Policy next month.

The Hindu spoke to Mr. Sharma on various issues confronting the UPA II regime. Excerpts:

What are the other sectors where the government is looking at relaxing the FDI norms to attract foreign investment? Is hike in FDI in defence on the agenda of UPA II?

Significant changes have been made in the FDI policy regime in recent times to ensure that India remains an increasingly attractive investment destination. There has been a public debate on the issue of defence indigenisation, and I feel there is merit in this argument. The present policy allows only 26 per cent FDI in the defence sector. We had floated a ‘Discussion Paper’ for liberalising the FDI Policy in this sector as it holds a lot of promise for catalysing growth in manufacturing and bringing cutting edge technologies into India.

However, given that it is a strategic sector, we would continue holding consultation with the Ministry of Defence before moving any formal proposal in this regard.

What has been the global response to opening up of 51 per cent FDI in multi-brand retail and 100 per cent in single-brand retail?

There has been a very enthusiastic response to the liberalisation of FDI policy in the retail sector.

Since January 2012, the government has approved five proposals worth $2.052 billion, including IKEA. Now the Cabinet Committee on Economic Affairs (CCEA) will consider the IKEA proposal. Apart from this, all major global retailers in multi-brand have met me, including the chiefs of TESCO, Carrefour and Walmart, and have evinced strong interest in investing in India.

However, these investors take a strategic long-term view and take time to study the policy before making investment commitments.

There has been a significant decline in FDI inflows in the recent past. What steps are you taking to stem this trend?

The Government has put in place a liberal FDI policy under which FDI up to 100 per cent is permitted under the automatic route in most sectors.

There is a small list of sectors which are either prohibited for FDI or are subject to restrictions in the nature of equity caps, entry route or conditionalities.

We have taken major decisions in liberalising FDI in the civil aviation and broadcasting sectors; multi-brand retail trading; single-brand retail trading and power exchanges recently.

Implementation of the e-biz project, a mission mode project under the National e-Governance Project, to provide online registration and filing payment services, to investors and business houses has started.

All major global reports released by United Nations Conference on Trade and Development (UNCTAD), Japan Bank for International Cooperation and A.T. Kearney rate India among the top three investment destinations across the world. Several measures have already been taken by the Finance Ministry and the coming weeks will see an enhanced push for liberalisation and reforms across the board which will strengthen the confidence of foreign investors.

Exports are showing a slowdown. Are we looking at new alignments at the global level to diversify the export basket?

The global economic situation remains fragile and the situation in the eurozone is particularly worrisome while recovery in the U.S. is weak. We have been in constant touch with all stakeholders.

In December last year, we had announced a series of measures, including extension of 2 per cent interest subvention up to March 31, 2014, providing incentive on incremental exports up to March 2013 and adding five new markets (New Zealand, Cayman Islands, Latvia, Lithuania and Bulgaria) under Focus Market Scheme.

We have started the process of consultation with industry leaders and export promotion councils and will be convening a meeting of the Board of Trade shortly.

We are also taking a close look at the revised SEZ (special economic zone) guidelines, and, I hope, within a month we will be able to announce a series of measures on the exports front, including the Foreign Trade Policy (FTP).

There has been a standstill in trade ties with Pakistan. What is your view on the freeze in economic engagement between the two neighbours?

In February 2012, I visited Pakistan with a high-level business delegation, the first-ever visit by an Indian Commerce Minister to Pakistan. A roadmap was drawn up for liberalisation of trade relations between the two countries which was progressing well until certain recent developments temporarily slowed down this engagement. However, I am optimistic that after the elections, the new Government in Pakistan will recognise the intrinsic merit of enhancing the economic engagement with India as strong and robust economic ties lie at the heart of enduring peace in this region. Both sides had delivered, to a large extent, on the agreed agenda as per the roadmap which include establishment of integrated check post at Wagah and pruning of the sensitive list from the Indian side. Pakistan also responded by moving from a positive list regime to a small negative list regime. We must not overlook gains registered over the last one-and-a-half years and should not allow forces of terror which have a vested interest in perpetuating tension to sully the environment.

What is being done to promote border trade from land routes and other areas with countries such as Bangladesh, Myanmar and Pakistan? Are we looking at granting more concessions to undo the huge trade imbalance that India has with these nations?

India is investing, on an average, about $30 million for constructing Integrated Check Posts (ICPs) along the land border with its neighbours. The results of improving trade facilitation measures are already evident. The new ICP at Attari-Wagah border, started in April 2012, has contributed to an increase in exports from Pakistan by 66 per cent during April-December 2012 as against the same period in the previous year. Seven such ICPs are being constructed in the first phase. The ICP at Agartala is expected to be completed by the middle of this year and at Dawki before the end of 2013. Petrapole is likely to get completed by the middle of next year. Also, Land Custom Stations (LCSs) are being developed with adequate infrastructure and customs facilities to improve bilateral trade. We have unilaterally reduced the sensitive list maintained under South Asian Free Trade Area and also reduced the peak tariff rates to help neighbours export more.

What is the status of the National Manufacturing Policy ?

The ambitious National Manufacturing Policy takes cognizance of the serious challenge of reviving the growth of manufacturing and raising its share in gross domestic product (GDP) from 16 per cent to 25 per cent. One of the key instruments of this policy is establishment of National Investment and Manufacturing Zones (NIMZs) which would come up as greenfield integrated industrial townships, 12 of which have already been notified, eight along the Delhi-Mumbai Industrial Corridor. Draft schemes on job loss policy and technology acquisition and development fund have been issued. Guidelines and Proforma for final approval of NIMZ have also been prepared. Work on two of the NIMZs — Shendra-Bidkin Industrial Park city near Aurangabad and Dholera Investment Region, Gujarat — will commence this year.

sujay.mehdudia@thehindu.co.in

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