India and China have set up a policy coordination working group to get rid of “impediments” that have held up mutual investments, Planning Commission Deputy Chairman Montek Singh Ahluwalia has said.
Officials from both countries will meet in Beijing in May to take forward proposals made during meetings last month between Mr. Ahluwalia and his Chinese counterpart Zhang Ping alongside the BRICS Summit in New Delhi. The idea is to iron out concerns expressed by both sides on persisting barriers to investment. Planning Commission member B. K. Chaturvedi will travel to Beijing for talks with Chinese officials, while Mr. Zhang, who heads the powerful National Development and Reform Commission (NDRC), is expected to travel to New Delhi in November for the second round of the newly initiated Strategic Economic Dialogue (SED).
While China has voiced worries over India's visa policies as well as proposed duties on power equipment that were recently withdrawn, India has called for greater market access for its companies, particularly in information technology and pharmaceuticals, and for a more friendly investment environment.
“This working group [on policy coordination under the SED] is looking at what it is that is holding up investment,” Mr. Ahluwalia told reporters. He was in the southern island province of Hainan to attend the government-supported Boao Forum for Asia, marketed by China as its ‘Davos'.
He said India needed “to make a very clear judgment” about its policies towards Chinese investments, which have been held up in some sectors on account of security concerns.
“Are we in favour of Chinese companies going to India and manufacturing products there or not? My view is we should be in favour of them. We are running a more and more open economy, with [more] integration with the global economy. We are looking at a country that in 20 years' time is going to be the largest GDP in the world. It just does not make sense for us to not be linking up with them.”
Mr. Ahluwalia expressed satisfaction with the SED's progress following its first meeting in Beijing last September, which set up four working groups in infrastructure, energy, environment and high-tech sectors to boost cooperation. A fifth group on policy coordination has been added to the list.
On Chinese concerns on a proposed 19 per cent tariff on the import of power equipment by India, Mr. Ahluwalia said whether the move would go ahead was unclear after the proposal was withdrawn before it was expected to be discussed by a Cabinet meeting. He said it “will be odd” if the proposal was once again put forward only a few weeks after the Budget.
At the Boao Forum, several Western companies too expressed concerns over the investment environment in India following the Vodafone tax case.
“Some people are interpreting the decision as if India thinks retroactive changes are fine,” he said. “My view, and I'm sure, the finance minister's view, is, as a general rule, retroactive amendments are not a good idea. This was a case where they were clarifying the law,” he added, noting that other countries too had passed similar retroactive laws in the past.
