Big Reforms Soon to Draw More Foreign Investments
FDI policy to be simplified, FIPB to meet twice a month for faster nod
India is rolling out the red carpet for overseas investors with sweeping foreign investment policy reform and quicker approvals while Prime Minister Narendra Modi's monthly review of projects is ensuring that delays are getting resolved quickly . In his first interview after taking over as economic affairs secretary, Shaktikanta Das told ET that the Foreign Investment Promotion Board (FIPB) will now meet twice a month to speed up approvals, signaling the clear intent of the government to push ahead with reforms on a wide range of issues.
The foreign direct investment (FDI) policy is being reviewed to make it simple and put the maximum possible sectors on the automatic route, obviating the need for government approval.
The government is also responding to the Reserve Bank of India's call for quicker transmission of monetary policy.Das said small savings rates could be reset more frequently as opposed to yearly adjustments to align them to market rates more quickly to reduce their distortive effect. Besides this, the Cabinet note on the monetary policy committee would be moved soon for consideration by the government.
Das said Finance Minister Arun Jaitley was keeping tabs on disinvestment--the government has set itself a record Rs.69,500 crore from this in the current year--to see that it yields maximum revenue.
The FIPB currently meets an average of once every month and the entire approval process can take more than three months even for investments of a few crores of rupees. Timeconsuming procedures were among the issues that global CEOs brought up with Modi during his recent trip to the US.
“At present, there are too many conditionalities and the (FDI) document itself needs to be simplified. Sectoral caps need to be revised and the process of approval should be automatic unless there are security concerns or in sensitive sectors,“ Das said. The current policy has sectors in which no investment is allowed while others are open to levels such as 26%, 49%, 74% and 100%, depending on how sensitive they are. The policy document, which is more than 120 pages long, has a number of conditions for every sector.
Das said the PRAGATI (pro-active governance and timely implementation) video conference--which the PM holds on every fourth Wednesday of the month with all government of India secretaries and state chief secretaries--has had tremendous impact on ground in terms of getting things moving, addressing criticism that the administration's execution was weak.
“A number of projects get listed, there may be many loose ends but when they come for the meeting most of the issues would have got sorted out...And, if any issues remain, timelines are fixed,“ Das said. All implementing departments are keen to speed up resolution and avoid delays, given that the monitoring takes place at the highest level.
He expects the economy to grow at least 7.5% in the current fiscal, better than the 7.4% that the RBI has projected in its latest monetary policy, when it cut the policy rate by a deeper-thanexpected 50 basis points or half a percentage point.
“The RBI decision on rate cut and quick move by banks to transmit the cut will have impact on the overall economy, particularly in sectors such as housing, automobiles, consumer goods,“ Das said. “It will lead to generation of additional demand and aid growth.“
RBI governor Raghuram Rajan had called for quicker transmission of rate cuts by banks, which in turn said they were constrained from doing so because of better rates on small savings programmes.
As part of the small savings review, the rates could be set more frequently, Das said. Small savings schemes pay nearly 1.5 percentage points more than bank deposits of similar maturity.Currently, small savings rates are reset annually and pegged to government securities.
Das said vulnerable sections would however be protected.“Certain aspects will have to be kept in mind like senior citizens and small savers. Their interest has to be duly factored in,“ Das said. The bureaucrat charged with the overseeing the economy rejected the observation of some rating agencies and multilateral lenders such as the Asian Development Bank that reforms hadn't gained momentum.
LAND BILL, GST
He said the land bill amendment may not have got parliamentary approval but states were independently passing laws instead, pointing to Tamil Nadu as a good example. s “The point is that states have t got over the problem in their own way through the legislative process. The fact that the land bill could not be passed cannot be termed as a stalled reform because the ultimate objective is being achieved,“ Das said, adding that land availability for industry was not a concern.
The goods and services tax (GST), scheduled to be rolled out on April 1 next year, remains a priority for the government. “GST is very much on the table and the government is determined and committed to take it forward and the parallel administrative action is going on. The drafting of bills is going on,“ he said.
Das said the government's accelerated spending to revive the economy was not a cause for concern and it was committed to fiscal discipline.
“The fiscal deficit roadmap is sacrosanct and it will be observed. The rest is a question of management of numbers, which will be done,“ he said in response to worries that the `onerank, one-pension' initiative for servicemen and the pay commission award could derail government finances.
He said indirect tax collections are looking robust and should exceed the budgeted figure. On concerns about slow pace of disinvestment, he said government is looking to get the most value out of its stakes.
“At this point of time, I would say we are working on a strategy to maximize the amount of disinvestment. The finance minister has reviewed internally with all concerned,“ Das said.
The Economic Times, New Delhi, 5th Oct. 2015