PK Chaudhary, who took over as the Department of Industrial Policy and Promotion secretary recently, tells Timsy Jaipuria that implementation of the policies designed to boost investment in different sectors of the economy would be high on his agenda …
How concerned is the department over the decline in FDI inflows?
I do not agree with this perception that FDI is falling. The cumulative figures of this year are robust. True, there was a dip in inflows in September but that should not be perceived as indicative of the global positioning of India as an investment destination. There are other countries competing with India to attract FDI but the long-term faith and confidence of both domestic and foreign investors in the Indian growth story remains intact.
What are the steps being taken to enhance investor confidence?
FDI inflows depend on several factors. First, the investible surplus with firms and the foreign investors? willingness to invest outside their country. The current global economic situation is one of uncertainty. Major economies are under pressure. Having said this, there are a few things which determine the decisions of foreign investors to invest in any country. These are the overall policy regime, the confidence in the stability of policies, the growth prospects of the economy and the market size.
Since FDI investments are always long-term decisions, India is very strong on the aspects of growth of the economy, the market size, and certain policy regimes also. But we need to work on the issues like infrastructure bottlenecks to boost the confidence of the investors.
What about opening up of new sectors to attract more investments? For long, there has been talks about opening up multi-brand retail to foreign investors.
We have a clear agenda on this (opening up more sectors to FDI). But the timing of decisions would depend on the macro-economic conditions and readiness of the political economy for such moves. We also need to consider the interest of the respective domestic industries, the consumer impact and also the need to integrate the local industry with other economies.
Indian economy is on a high-growth trajectory. And to spur investments and capital formation in the economy, we need much higher levels of foreign investments in various sectors. Our prime minister, finance minister and commerce and industry minister have reiterated this at various fora. The domestic industry is robust and no longer afraid of competition. It is important to ensure that FDI inflows facilitate technology transfer and also open new markets for manufacturers in the country.
What is DIPP doing to attract investments in infrastructure, as this sector is central to the country’s manufacturing competitiveness?
We must realise that we do not have poor infrastructure but we have inadequate infrastructure. For this, the government is laying huge emphasis on increasing
the infrastructure facilities in the country by inviting private
investments.
The government, on its own, is also investing in the sector. The public-private partnership mode is working well in many areas like ports, airports and roads.
We have recently come out with a National Manufacturing Policy. The government has also given approval for the investment corridor DMICDC in which it will be investing R18,500 crore and $9 billion has been committed by Japan. Along the corridor, several new industrial towns will be set up, with the whole project being facilitated by government-supported infrastructure like roadways, railways, power stations, etc.
The Cabinet has decided that DMICDC will be a deemed government company, which means the two key players, IDFC and IL&FS, with 51% stake in it will have to exit. These companies say they have not been formally informed of the decision in advance.
According to the Cabinet decision, DMICDC will have a new framework, that is a new business model where all the investments will be made through a trust and the members of the trust will be senior government officials. So, the two entities (IDFC and IL&FS) will have to exit. Anyway, if these two entities have to bid for any of the projects to be built under DMIC, they cannot be a part of it. The exit, therefore, will help these firms in participating in the DMIC projects. I suppose the two firms had known about the move before the Cabinet decision. They will be formally informed about the decision soon.
What is the immediate priority of the department?
The immediate priority is to stitch together various policy decisions in the last few months and work aggressively towards their successful implementation. It is important that the manufacturing sector (which currently is a laggard accounting for just 16% of the GDP) overcomes hurdles on its growth path.
