Disappointed with the virtual stalemate on key economic reforms in the UPA-II government, a high-level group comprising top global business honchos of Indian origin like Indra Nooyi, LN Mittal and Vikram Pandit would meet Prime Minister Manmohan Singh early January next year to press for speeding up of reforms. Subjects that would figure prominently in the meeting would be raising the FDI cap in insurance to 49%, allowing foreign investment in multi-brand retail and setting up one composite FDI body which would both frame and clear FDI proposals, a source said.
These corporate bigwigs, apart from 15 other members, who form a part of the PM’s Global Advisory Council for Overseas Indians (GAC) which was formed in 2009, meet once a year to discuss issues ranging from skills development, education and facilitating foreign investment into the country.
A member of this council told FE that the high-powered panel was finalising its discussion points with the PM and there was broad consensus to raise issues especially pertaining to the key bottlenecks in increasing the FDI limit in some sectors. ?Among the three issues would be that of insurance. The bill (to raise the FDI cap to 49%) has been pending for two years. Our estimates suggest that over the next 10 years, India would have to invest anywhere close to $1.7 trillion to create the basic infrastructure for insurance. Allowing FDI would be one such option,? the source said.
Raising the existing 26% cap on FDI in insurance to 49% was seen as one of the big-ticket reforms towards the fag end of UPA-1. The cabinet had given its in-principle nod to the proposal. However, due to the impending elections in the May 2009, the matter has still not seen the light of day. The Insurance (Amendment) Bill 2008 sought to not only raise the FDI cap but also provide IRDA flexibility to discharge its functions.
The source said that apart from urging the PM to allow FDI in multi-brand retail, the panel would also urge the PM to streamline the FDI procedures in the country by setting up one composite FDI body. As per the current practice the Department of Industrial Policy & Promotion (DIPP) frames the FDI policies under the commerce & industry ministry while the Foreign Investment Promotion Board (FIPB) under the ministry of finance clears these propoals.
?We would hope that the PM considers setting up one single centralised body. Since there are more than one government bodies dealing with FDI, it delays the process,? the source said.
Framing of a one single body for both framing FDI policies and clearing proposals was discussed in the previous UPA regime but due to lack of beuareucratic consensus it did not materialise. The commerce and industry ministry and finance menistry are averse to let go their FDI related departments ? DIPP and FIPB, respectively. Even though the finance minstry had earlier on several occasions raised the issue of subsuming DIPP with FIPB, a severe resistance from commerce minister under Kamal Nath had prevented that.
In the April-September period, FDI inflows into the country had dipped 28% to $11 billion as against $15.3 billion in the same period last year. Following the US President Barack Obama?s visit to the country earlier this month, the sensitive issue of allowing the likes of Wal-Mart and Carrefour to set shop in the country has gained momentum. Government sources said that the Prime Minister?s Office, Planning Commmission, finance ministry and the agriculture ministry have agreed to allow upto 26% FDI in muli-brand retail.
The PM?s GAC was the first of its kind initiative by any government to create a platform to engage with successful Indian leaders across the world over various issues. Apart from Nooyi, Mittal and Pandit, other key members include the first Indian-born head of McKinsey & Company Rajat Gupta, Padma Bhushan awardee in 2001 Swadesh Chatterjee, Columbia University professor Jagdish Bhagwati and other key officials of the government including external affairs minister SM Krishna.
