‘India is not an outlier on FTAs’

DOING BUSINESS: “What I have a problem with is, when we [India] take care of our national interest by protecting our industry and service sector, the U.S. says we are obstructive….” — PHOTO: KAMAL NARANG

DOING BUSINESS: “What I have a problem with is, when we [India] take care of our national interest by protecting our industry and service sector, the U.S. says we are obstructive….” — PHOTO: KAMAL NARANG   | Photo Credit: Kamal Narang

Commerce and Industry Minister Nirmala Sitharaman retained her portfolio in the recent Cabinet reshuffle despite criticism on falling exports, and the slow progress in negotiations on Free Trade Agreements (FTAs). In an interview to Suhasini Haidar and Arun S., she defended her approach on FTAs, and explained why she doesn't think she has suffered for want of being a Cabinet Minister.


There is a sense that India is reticent about concluding negotiations on FTAs, whether it is with Australia, Canada, New Zealand or the European Union (EU). That the commerce ministry is slowing down the process.

Not at all. India is not against concluding any FTA talks. But let’s not forget what has been happening in the last two years. For instance, with Canada, when both sides were keen to go ahead with the talks, Canada was going through a process of elections. So the FTA talks got held up. Unfortunately, Australia is a similar example. The EU did not have an election, but Brexit was occupying their minds. Let us see the global context. In the last two years, except the Trans Pacific Partnership, and one, say Vietnam with Russia, tell me of any FTA signed anywhere else. Globally, trade was growing slower than the world output. The economies of countries such as Brazil and Russia are contracting. There is devaluation of currencies. So if that is the case, and FTAs are not being signed anywhere else, it’s not as if the FTA talks involving India stand out as an outlier.

Regarding the Regional Comprehensive Economic Partnership (RCEP) negotiations, you had hotly contested The Hindu’s story that countries involved were unhappy with India’s so-called obstructionist stance. Give us a sense of the RCEP negotiations and whether they will be actually concluded.

In the RCEP, we have made our initial offers for goods, we have made our offers for services. We gave a layered approach to it. The third layer, and a very important layer, is with those countries, like China, Australia and New Zealand, with whom India does not have an FTA. As it is, without an FTA, you know the impact of Chinese exports to India. For me, representing India, as much as I can give, I need reciprocal things to be given to me. If I am willing to offer tariff concessions on goods, I want something to be offered by them to boost India’s services.

The U.S. is threatening trade sanctions against India over poultry import restrictions, after India lost the case at the World Trade Organisation (WTO). Are you worried?

On the sanctions, I think we should put it in perspective. A certain notification was expected from the Animal Husbandry Department in India after the WTO case went against us. For whatever reason, the notification came a day after the U.S. thought we didn’t keep up the deadline. The notification has come now, so I’m sure that the U.S. will take note of it, and there wouldn’t be a basis for any sanctions.

Meanwhile, Cairn Energy has just reportedly claimed a whopping $5.6 billion compensation from the Indian government in a tax dispute alleging that India has “failed to uphold its obligations” under the U.K.-India Bilateral Investment Treaty (BIT). What is your view on such investor-state disputes?

Issues related to investor-state disputes are a matter of serious concern. It is something which we have to apply our minds to. Ultimately a BIT cannot lead to a situation where companies which make losses for some reason can pull up the sovereign state and say you have to pay up for the loss.

India dragged the U.S. to the WTO dispute settlement body over the US’ move to hike fee for H1B and L1 temporary work visas. Despite this, a Bill has been introduced in the U.S. now to prohibit firms, including from India, from hiring employees on H1B and L1 visas. Have the discussions with the US on the issue failed totally?

I don’t see it as a case of negotiations failing. What I have a problem with is, when we (India) take care of our national interest by protecting our industry and service sector, the U.S. says we are obstructive. Shouldn’t India too, like other countries, protect its national interests? When they (U.S.) do it including by tightening their visa regime, they say it is to take care of their service sector and jobs.

Are you open to considering FDI in multi-brand retail? A recent US State Department review said India is slow to propose reforms that match its rhetoric, and that India’s GDP numbers may be overstated.

On FDI in multi-brand retail, we (BJP-led NDA) won the general elections two years ago based on our manifesto which did not favour such a move. So we will stick to that. On GDP figures, India’s chief statistician has said the numbers are trustworthy. If some are some talking about why the figures are wrong, there are many others who are talking about why the figures are right.

Most crucial economic ministries, including that of commerce and industry, are now led by only Ministers of State (MoS) unlike in the UPA and Vajpayee regimes when these portfolios were held by Cabinet-ranked ministers. Do you think NDA government under Prime Minister Narendra Modi has demoted these ministries including yours?

Absolutely not. All MoS holding Independent Charge like me have the benefit of the 360-degree picture which you feel only Cabinet ministers benefit from. It is not necessary that MoS with IC attend just those Cabinet meetings where only the policy decisions concerning our ministries come up. There have been situations where even when a Cabinet meeting did not have issues concerning my ministry on the agenda, I have been asked to attend just to look into what is happening because it had some implications on the issues related to my ministry or on the larger economy. So in that sense, MoS with IC have never been denied the benefit of being there for such decisions. I don’t think I have suffered for want of being a Cabinet minister. I don’t have a Cabinet minister to whom I report. I report directly to the Prime Minister.

India received record Foreign Direct Investment (FDI) inflows in FY’16, but mostly from Mauritius and Singapore; and a significant portion of the total inflows have gone into the services sector and not into the manufacturing sector. Are you worried?

I am not worried about FDI coming in mostly from Mauritius and Singapore. The inflows are not hot money coming in and going out quickly after earning short-term profits. Foreign investors are keen to stay put here and see that manufacturing happens here. The investment may start off with the services sector and branch out to manufacturing. There is a great deal of interest from many top notch global manufacturers who want to manufacture in India. For instance, Russia was the first to respond to our ‘Make In India’ call by showing interest in nuclear energy and defence, besides companies like Lockheed Martin and Foxconn. Chinese companies making components are also coming in to places like Pune. So manufacturing is getting FDI, but for it to get captured under statistics and joint ventures and so on is taking time. Invest India (government’s investment promotion and facilitation agency) has been fairly busy. They are taking schemes like Make In India to various states and helping companies in making investments at the right place. I don't think all the FDI is only going to services. There is a movement towards investing in manufacturing. People are looking for JV partners who match up to their scale and size.

According to data from your ministry, the proposed investment (in India) has fallen from Rs 4 lakh crore in 2014 to Rs 3.1 lakh crore in 2015. Is there a concern there?

Investment is happening, but you can always pick up a random statistic and say that investments have dropped. It does not show the full picture. Otherwise why will India be receiving so much FDI? Where ever we go overseas, the first thing we hear is that at least your economy is stable, the macro fundamentals are consistent and the inflation is kept fairly under control in the last two years. You may still want to talk about price rise in pulses and the seasonal fluctuation that happens in fruits and vegetables. But largely, let us agree that it is not a situation which developed today. So it is not right to look at those indicators and say that the retail inflation is hitting growth. It was higher than now when the NDA government came in. Food inflation was also higher. Now at least we have brought it down to around 5 per cent. Manufacturing growth is also going up, so there are definitely green shoots appearing.

Boosting exports is among your ministry’s key objectives, but shipments have fallen for 18 consecutive months. Yet you are drawing this pretty picture about the economy. Isn’t the contraction in exports one of your biggest concerns?

Yes it is. But I am not trying to create a picture which is untrue. What I am trying to say is when we are talking of FDI and the interest of investors in India, the negatives are spoken as though the investors are not bothered about whether the negatives are true, and as though the FDI which is coming in is forgetful or is ignoring the negatives. If that were true, would those investors invest so much? People see India as a growing economy under a steady leadership. If the export sector had also grown, it would have been even better. But it is not that a fall in exports has shaken the confidence of investors. I am not denying that there are problems and exports have fallen. We have had extensive consultations with every export sector, and not once have I heard anybody tell me that exports are suffering because of our policies. They have conceded that global situation is bad. Commodity prices are coming down, and there is currency volatility. Currency fluctuation is becoming the order of the day rather that an exception. Exporters are suffering, but they have said that the hand holding that the government is doing has helped.

To another issue in the news: You spoke about building buffer stocks of pulses of eight lakh tonnes. Tell us about where you see the country’s pulses policy going because the shortfall is quite high.

In the last year, for both Kharif and Rabi, the Minimum Support Price (MSP) for the pulses has been increased. The worrying factor is, in the last two years, the output of pulses in India has fallen, and with our consumption being a steady 22-23 million tonnes (mt), what we were growing was about 17 mt, and it has now fallen to around 15 mt, which is itself worrying. In the short term we have spoken to Myanmar, Mozambique, Tanzania, and Canada. So, this eight lakh tonnes will be met by procuring both from Indian farmers and the importers. That stock will only be released as and when we think the prices are going up.

That you are looking at these MSPs and that you are building a larger buffer stock than anyone had ever expected, will it contravene the WTO norms?

WTO allows you to give MSP for those stated commodities, and pulses are in that list. So we are not violating any of the WTO compliances. Second, the stocks that we hold, of wheat and rice is not to distort the market, we are only trying to help Indian buyers of dal, who can’t purchase it at Rs 200 per kg. Above all, when the country is running short of a particular item, we have to import. So I consciously keep my WTO compliances in my mind, when we are talking about pulses.

Soon after the NDA government under Modi took over, it focused on getting the Land Acquisition Bill passed by Parliament. In hindsight, do you think your government wasted precious time on that and ended up getting a ‘suit-boot ki sarkar’ (pro-rich and pro-corporate) tag, instead of focusing immediately on other reforms to attract investment and generate employment?

It was not a waste of time, it was an effort taken. We tried everything to ensure the passage of the Bill, but there was no cooperation from the Congress party. It was the Congress which wasted everybody's time by engaging in nitpicking on something that essentially was their Bill. It was the Congress which tired to give us the ‘suit-boot ki sarkar’ tag, but it did not stick. If any government has worked for the poor, it is ours and I can give you any number of examples on the measures we have taken for the poor. So repeating the term ‘suit-boot ki sarkar’ without much of a basis is not going to help the Congress.

But land availability is not a major problem for the industry. In Special Economic Zones (SEZ) alone, around 33000 hectares is lying unused. With hardly any investor interest in SEZs now, how are you going to ensure productive use of the vacant land?

On SEZs, it is necessary to put facts in context. Acquisition of those huge tracts of land was not done during the NDA regime under Modi. Extensive land was acquired for SEZs during the UPA regime. It was also the UPA that brought in Minimum Alternative Tax (MAT) and Dividend Distribution Tax (DDT) undermining the SEZ concept itself. SEZs became not so fashionable due to MAT and DDT. It had nothing to do with Modi or NDA. We are now looking at what best we can do to revive the SEZs, whether by linking it with DTA (or domestic tariff area, the area in the country outside the SEZs) or by seeing if the non-processing area (meant for SEZ supporting infrastructure area like schools, hospitals and hotels) and centres in that area can be used for other purposes that can help the SEZs.

Passage of the Goods and Services Tax Bill is crucial for the success of the upcoming monsoon session of Parliament and to ensure higher GDP growth. With issues like the Supreme Court ruling on Arunachal Pradesh and Kashmir violence likely to dominate the session, how confident are you of Parliament nod for the GST Bill?

The Finance Minister is confident that the GST bill will be passed in this session of Parliament and I share his confidence. The FM will be talking to the Congress and I hope the GST gets passed.

With a new governor soon at the helm, do you see the Reserve Bank of India (RBI) becoming more open to prioritising growth, by not keeping the interest rates as high?

For the government, the negotiations, discussions and sharing of information with the RBI are largely done through the Finance Ministry. We (commerce and industry ministry) give our input – on what will affect the export sector and industry – to the Finance Ministry. I have been arguing for a rate cut.

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Printable version | Sep 24, 2020 5:23:10 PM |

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