Finance minister Nirmala Sitharaman on Tuesday asked India Inc as to what holds it back from investing in manufacturing when foreign investors are bullish about India. She also wondered if corporate India, just like Lord Hanuman, needs to be reminded of its immense ability.
Speaking at the Mindmine Summit here, Sitharaman said the growing confidence of overseas investors in India is reflected in sustained inflows of foreign direct investments and foreign portfolio investments, in addition to greater participation in the stock markets.
“I would equally want to know from Indian industry why they are hesitant (to invest). We will do everything to get industry to invest…(but) I want to hear from India Inc what’s stopping you,” she said.
“Is it like Hanuman? You (India Inc) don’t believe in your own capacity, in your own strength and there has to be someone standing next to you and say ‘you are Hanuman, do it’… That person can’t certainly be the government,” Sitharaman said. “This is the time for India and we can’t miss the bus.”
The minister’s statement comes at a time when private investments have remained elusive in recent years or are limited to a few sectors. This has forced the public sector to do the heavy lifting for heralding an investment-led economic revival through enhanced capital spending in the aftermath of the pandemic. Although gross fixed capital formation in the June quarter jumped 20.1% from a year before, against 5.1% in the previous quarter, it was driven substantially by the public sector, especially the Centre’s budgetary capex.
The share of manufacturing in the country’s GDP, too, has remained stagnant at about 16-17% for decades now. Efforts by successive governments to raise it to about 25% of GDP have hardly yielded any result. The PLI scheme is yet another attempt to spur domestic manufacturing in a big way and create few global champions in over a dozen sectors identified under it.
Many foreign companies, Sitharaman said, are seeking to relocate from China and India is emerging as a favourite destination for them. They are drawn to India not just by recent policies like the production-linked incentive schemes and a cut in the corporate tax rate but also by the overall ecosystem that supports businesses, Sitharaman said.
Many countries show interest in rupee trade
The finance minister said many countries have expressed interest for settling bilateral trade with India in the rupee after the Reserve Bank of India announced a mechanism in July to facilitate it. This step, among others, is towards full capital account convertibility.
“It isn’t the rouble-rupee trade, which was the old format. Now this (bilateral rupee trade) formulation, which I am glad the RBI has come up at a time, which is so critical,” she said in response to a question as to whether India was ready for full capital account convertibility.
The mechanism to facilitate the settlement of international trade in the rupee is ‘opening the Indian economy more than what can be imagined’.
“Post-pandemic, India is coming up with so many out-of-the-box solutions…I would like to highlight the fact that we are a lot more open economy now, we are a lot more open in the way we are talking to countries, we are willing to have our digital platform become interoperable between countries to enable cross-border transactions,” she said.
On July 11, the central bank notified the new arrangement to promote trade growth by reducing the dependence on hard currency, with emphasis on exports from India and to support the increasing interest of global trading community in the rupee.
For the settlement of trade transactions, the banks concerned will need special rupee Vostro accounts of correspondent banks of the trading partner. “Indian importers undertaking imports through this mechanism shall make payment in rupee which shall be credited into the special Vostro account of the correspondent bank of the partner country, against the invoices for the supply of goods or services from the overseas seller /supplier,” the RBI said.