In this Idea Exchange, Anand Sharma, minister of commerce and industry, speaks about FDI in retail, retrospective taxation and the party?s Chintan Shivir in Jaipur. The session was moderated by Subhomoy Bhattacharjee of The Indian Express
Subhomoy Bhattacharjee: Murli Manohar Joshi has said if the BJP comes to power, it will think about rolling back FDI in multi-brand retail. There is a sense of uncertainty. Do investors reflect such concerns?
Such statements are irresponsible. In a democracy, political parties can take positions. I have explained in great detail that when the BJP-led NDA government was in office, they were planning to open up FDI in multi-brand retail. But they never had any stakeholder consultations. While for our policy, we consulted all the stakeholders, all the state governments, the farmers? unions, the consumer unions, community organisations, industry association, and small and medium enterprises (SMEs). After that, the committee of secretaries met, the recommendations were considered. So the deliberations went on for over a year. It was a democratic exercise, transparent and inclusive. Now, the BJP did a U-turn purely because of partisan politics. If farmers are in favour of it, consumer organisations are in favour, then whose case is the BJP pleading? Moreover, we left the decision to states. So it?s for the states to decide. It is undemocratic to deny those states who have been in favour of it. The states who are not in favour can rethink and apply later. The licence is given by states. I can understand the concerns of the Left parties because they have ideological blinkers and I can?t change that. Yet, when they go to China, they will shop from multi-brand retail stores. The BJP has an opportunistic agenda. Such statements do a great disservice to the country, particularly at a time when our economy is under stress and there is a slowdown. The trade deficit and current account deficit are worrisome. For financing these, there are only three ways?FDI, FII and External Commercial Borrowings. First option is FDI. So, if we are taking steps which will restore the confidence of our global partners, should that be negated? The BJP owes an explanation to the country on why they have done a U-turn. This is double standards and hypocrisy. The elected government has the discretion to take an executive decision and this has been dragged to parliamentary debate, which has never happened in the history of the country. And now, after having lost the vote, they are still talking about it.
Shobhana Subramanian: Why has the Ikea proposal (to open cafetarias at proposed retail outlets) been withdrawn?
It was withdrawn because it needed some clarifications. We have taken a view after Ikea?s representation that they have a global model and that model includes the cafeterias too. So there is not going to be any setback. Ikea proposal, based on their global model, will be approved. There is no question of any opposition. There was a question of clarification. It has been clarified by the department concerned.
Sunil Jain: When it came to you the first time, did it already include the global model as the format?
When the proposal came to me, it did not include that. Subsequently, we sought some clarification from Ikea. The file had been put up in the ministry and I, as a cabinet minister responsible for FDI in the country, approved it. Now, it will go to the Foreign Investment Promotion Board (FIPB) and I have no reason to doubt that this proposal will go through as it is. You must realise Ikea is already engaged with India in a big manner. Once they set up their stores in India, their sourcing would also go up.
Sunil Jain: On Vodafone, there is no clear reason why a retrospective tax was put. What is the stand of the industry minister on this? Isn?t it unfair?
I think we have a stable tax regime. At the same time, revenue-related matters are the domain of the finance minister. It is not my ministry?s prerogative. I am sure Mr Chidambaram is seized of it and whatever view has to be taken for finality and closure, shall be taken. I am not in a position to reveal the discussion I have had with the finance minister. I am, however, in favour of predictability and stability of the tax regime. I am, principally, not in favour of any retrospective amendments. It has created some problems in the past, like in the case of SEZs. The understanding was that there would be hand-holding or grandfathering of SEZs until the Direct Taxes Code kicks in. I talked to the finance minister that we would want this tax to be reconsidered and reviewed. However, the finance minister has not agreed with us. Look at the employment SEZs provide. Exports out of SEZ were more than R3 lakh crore. This is very important for us. So that?s why when we put up any policy, it should be stable. I have apprised the Prime Minister and the finance minister of my views.
Swaraj Thapa: The Prime Minister has said that it can not be business as usual with Pakistan. Have your bilateral meetings with your Pakistani counterpart been put on hold? Second, what is the status of trade ties between Pakistan and India? Also, since you are drafting the discussion paper on India and the world at the Chintan Shivir, will India-Pakistan issues figure in it?
Yes, it will. In the document, we will look at our neighbourhood and about our approaches. But it will not be restricted to that. There are other concerns too, which India has, such as the evolving global situation, and yes, particularly in our neighbourhood. We have been sincere in engaging with Pakistan. There have been breakthroughs and meaningful outcomes and deliverables, particularly the assurance they have given for the first time, to move from a positive list to a negative list of tradeable items. Earlier, 18% tariff lines were tradeable, now 18% are on the negative list, 82% are tradeable. The dialogue between the commerce secretaries is continuing. The PM has said while we are engaged in a positive manner, Pakistan must recognise and respect the sincerity with which India is engaged and it mustn?t allow any institutional support for any hostile act which leads to revival of tensions or escalation of tension. Conflict and tension is counter-productive. Both countries have enough young people who have to be socially and economically empowered. Investment and trade can meet the aspirations of younger people. Any hostile act sets the pace of engagement back. And for this horrific act, Pakistan must punish the perpetrators because it?s unacceptable. It has shocked not only us but the entire world.
Kirtika Suneja: We have entered into the Regional Comprehensive Economic Partnership. Does it mean India is planning an FTA with China?
We are not looking at any FTA with China. We have our concerns which have been communicated to the leadership of China at my level and I also had the opportunity to meet premier Wen Jiabao. We have told them that we need to address the issue of trade imbalance and that can only be addressed by increased market access to us, particularly for the IT sector and the pharma industry. But so far, deliverables have been weak but we are pursuing it.
Coomi Kapoor: Will any important decision evolve from the Chintan Shivir in Jaipur?
This is a very important party conclave and we will be deliberating on the state of the economy, also the challenges we have due to the global slowdown. We can also inform our party colleagues and senior state leaders about our policy priorities and the philosophy behind major decisions. Surely, we will be looking at the political reality in our country. We are aware of the complexity and the Congress will work to put together a pragmatic plan of action.
DK Singh: Cutting out oil subsidies figures in your political document. But do you have the political will in an election year to carry out even some rationalisations?
We have two senior colleagues involved in the process. One is the petroleum minister and the other is the finance minister. So I think the Congress leadership has the collective wisdom to take a right step forward. I can?t comment any more on that.
Kirtika Suneja: With Pascal Lamy retiring, who is India supporting as WTO chief?
I was in South Africa recently and I met with my counterpart Rob Davies and president Jacob Zuma. I have also been in touch with the Brazilian minister. Ministers of IBSA (India, Brazil, South Africa) will be meeting in Davos and we will have a BRICS ministerial. We are looking at the candidates? list. We want WTO to provide leadership and the next DG should command the confidence of developing and developed countries. At this stage, we can?t take a final view.
Kirtika Suneja: Even after 10 years of Doha, nothing has concluded. Does it make any sense for us to continue with it?
There are some countries which have spoken in this language. But this will be disastrous for multilateral trade. Doha negotiations are the only one dedicated to developing countries. The development dimension can?t be and must not be diluted and India will oppose such dilution along with our coalition partners. At the same time, we will engage the G-11. We want the countries to re-engage by March. We have impressed upon the US and other developed countries that the rule-based multilateral trade regime has to be put in place to correct historical distortions.
DK Singh: It is for the first time that an urban development minister would be leading the Indian team in Davos. What do you think about it?
I am only looking at what I have to do. At the centre of every negotiations, in such events, there is always the commerce and industry minister. So the ministerials which will be taking place?BRICS ministerial, IBSA ministers and trade ministers?I have to attend all these three meetings. The reception is being hosted by me. I have cleared the publicity campaign. So we will do what we have to do. I would like India?s message to resonate. It is not a concern. We have gone together in the past. We all have our engagements.
Timsy Jaipuria: It is understood that the new SEZ policy will be unveiled soon. Considering that MAT and other taxes have been a concern for investors, can we say that there will be lower MAT rates?
We are still talking. The guidelines will make it more investor friendly. We are looking at the issue of IT SEZs. There has been a demand from the IT industry that we should not have the same stipulation for them in terms of area. Much progress has been made. Earlier, it was expected that when DTC kicked in, all sops would go. But the DTC has not yet come and that was a setback. The hiatus has affected investor sentiment. I hope the DTC comes and the new guidelines give some relief. Investors would be looking at something which makes it attractive. We are now running the last lap.
Dilip Bobb: Between the two emerging powers, China and India, we seem to have taken a back seat. What is the message that you would like the world to hear from India at Davos at such a juncture?
There are many things which we have done and which have attracted the attention of the world. The first thing we are doing is the biggest policy roll-out of India in decades. That is the National Manufacturing Policy (NMP). NMP is an investment in the country?s future and will be transformative for the future. We are looking at increasing the share of manufacturing in the GDP to 26% and more job creation. There was a social cost to pay if we hadn?t done it. These manufacturing zones will not be like SEZs. This is being done in partnership with states. This is, in fact, attracting attention now. There are other major countries who want to be partners. Some developed countries are looking at it. The US was the first to show some interest, China has shown very serious interest, Japan and Germany have also shown interest. Yesterday, the UK also showed interest for two of these townships. We will be making our presentations. Then we have shown firmness in our FDI policy. We have proposals coming in. It has begun in multi-brand retail too. So this is what we are pushing for.
Rishi Raj: In the FDI-in-retail policy, there is still a clause in the cash-and-carry segment about how much an entity can sell to their group firms. Is it still there? Shouldn?t it go?
Let us look at the future. Whatever provisions we write will have to be prospective. If the companies, as you say, find the old provisions restrictive, they can always apply for a fresh licence under the new policy in retail. Our new policy has an Indian signature and proposals have to come now. For instance, we have said that $100 million is the minimum in FDI in multi-brand retail and 50% of that has to go for creation of infrastructure and 30% of the sourcing has to be from SMEs.
Kirtika Suneja: What is the update on FTA with the EU?
The negotiators have not only made substantial progress but have settled most of the issues. There are still a few issues to tie up. We have already said settled issues must not be renegotiated. On automobiles, etc., we are very clear that the earlier understanding holds good. On the services sector, the understanding is very robust and we are hoping that in mode 4 (movement of people), India will stand to benefit. So we hope that by the time the next ministerial takes place, we will have something to announce. Once concluded, it will be the most ambitious FTA both the EU and India would have ever signed with any one.
Transcribed by Shruti Srivastava