Momentum is behind ease of doing business in India

Momentum is behind ease of doing business in India

Nirmala Sitharaman, India's commerce minister, maintains a punishing 14-15 hour daily work schedule. Over the last two years, she has been in the thick of the action and has earned a reputation for being a tough task master and a committed reformer. She spoke exclusively to India Inc.′s Consulting Editor Arnab Mitra and discussed a wide range of economic issues in this exclusive interview. There have been mixed reports on how Brexit will impact India. What is the government's take on this issue Does the government have a plan to maximise the opportunity and minimise the cost for Indian companies The finance ministry, the Chief Economic Advisor, the Niti Aayog and other concerned ministries have been monitoring the situation even before the outcome of the referendum was announced. We have traditional and mutually beneficial trade and other relationships with both the UK and the European Union (EU). About 800 Indian companies are present in the UK. They are creating jobs, both in the UK and the rest of EU and serving the entire region. I'm sure they, too, have a Plan B to deal with the situation. We are watching the situation very closely and foresee short-term and medium-term volatility. India is better placed than many other nations to face the turmoil generated by Brexit but the uncertainty may linger. The UK pulling up the drawbridge for our talent will not be good for India. What is the government doing about this

Much before Brexit, I'd gone to the UK and met the immigration minister on the high visa charges and other (restrictive) immigration policies. I also asked the minister about student visas and the cost of studies in the UK. Our High Commissioner to the UK brought up the issue of the UK denying work permits to Indian students who graduate from British universities as was the case earlier. That condition may continue for some time. But now, post-Brexit, we hope our boys and girls will get better access to British universities and better conditions for students following their studies. We are seeing a rise of protectionism in the US. In particular, the issue of free movement of Indian professionals, especially the grant of H1B visas to Indian IT professionals, is once again becoming an issue. How is the government dealing with this issue We have discussed the visa-related matter with the US at various levels. We have talked to US Trade Representative and US Commerce Secretary both during our strategic dialogue and later. We have also made it public that we may approach the WTO on increase in visa fees as this could be viewed as a non-tariff barrier. This is against the spirit of free trade practices on the movement of personnel. So, we may take the US to WTO. India's exports have been falling for 18 successive months. What is the government doing to arrest this trend The quantity of our exports hasn't fallen. But because of falling commodity prices, the value of our exports has fallen. But there is no across the board fall; several sectors, especially some labour intensive sectors, are holding out. We can now hope for a steady revival. We are making efforts to find new markets. In this context, some new markets have opened up in Africa. Central Asia is another region that we're focusing on. Then, the interest equalisation scheme will reduce the cost of credit for exporters. We've also taken steps to encourage exports from small and medium companies. These measures will begin to show results in the near future. Was the recent announcement of liberalised FDI [foreign direct investment] norms in nine sectors a reaction to Raghuram Rajan announcing his return to academia These decisions couldn't have happened overnight. We announced the first tranche of FDI-related changes - what you call reforms - in November 2015. Since then, we have worked out how to ease FDI norms further and concluded that FDI under 49 per cent cap can be moved to the automatic route. Such decisions across so many sectors cannot happen overnight. Work was going on and we announced the changes once it reached a logical conclusion. It just happened that the announcement was made on the Monday that followed the RBI Governor's announcement the previous weekend. Isn't the further liberalisation of FDI norms in defence an admission that the previous norms were

too restrictive Instead of opening up the sector incrementally, why doesn't the government announce 100 per cent FDI through the automatic route After all, this would be an improvement over importing entire systems from abroad. Even when we announced the FDI policy for the defence sector in November 2015, we made it clear that foreign investment up to 49 per cent would be permitted through the automatic route and any foreign stake beyond that limit would be allowed on a case by case basis if it brought in “state of the art”, “cutting edge” or “modern” technology. This, we found, was creating confusion about what was “state of the art”, “cutting edge” or “modern”. So, we have decided to remove the confusion. It is not incremental, but a simplification of an existing policy. The liberalised FDI norms have been widely welcomed by industry and analysts. But some of your own allies have opposed it. Given this disconnect between the government and an important part of its support base, how united is the party on economic reforms The party is completely united. We have been engaging with these groups and will be engaging with them on a continuous basis. The government's decision is in line with what the BJP manifesto said in 2014 - that we will push reforms, improve the ease of doing business and create jobs. So, these measures are not a violation of our manifesto. The latest round of FDI reforms significantly liberalises e-commerce and single brand retail. Some say easier entry norms for foreign players in food retail could be the first step towards allowing MNCs into multi-brand retail - which, incidentally, hasn't been removed from the statute books. Your comments... I want to dispel this inference. What we have done is introduced a level playing field between ecommerce and brick and mortar stores. We have done nothing on multi-brand retail. That is a commitment in our manifesto. The TPP [Trans-Pacific Partnership] is now a reality. The ASEAN [Association of Southeast Asian Nations] has been around for decades, as has the EU, despite Brexit. India is not part of any regional trade pact. Is the country losing out because of this What is the way forward India is actively engaging in negotiations with ASEAN-plus and the Regional Comprehensive Economic Partnership and hope to sign an agreement as soon as possible. India has been negotiating FTAs with Thailand, New Zealand and the EU for a long time but nothing much seems to have come of these talks. Why is India shy of signing FTAs with our trading partners India is not fighting shy of signing FTAs. India is a large market. We have a large middle class with substantial purchasing power. This makes India a very attractive market for anyone negotiating with us. At the same time, we also have a large number of people who are poor. The government has to keep their interests in mind. Then, there are sectors such as automobiles, auto components and pharmaceuticals, to name only three, in which India is globally competitive and in which our companies have earned global acclaim. When we negotiate trade deals, we have to ensure that our partner country gives us as much access in these and other sectors such as services as we give them. There has to be a spirit of give and take when working out the details and we have to make sure we get a good deal that protects our national interest. India has laid out the red carpet for Chinese investments in our infrastructure sector. Several issues, such as security and other clearances have been eased. Yet, China continues to play hardball with India on terrorism and NSG entry. Does India have a Plan B to deal with this kind of behaviour I'll deal only with that part of this question that concerns my department. We've had lots of exchanges with China and made it clear that we welcome its investments and goods. But we're also negotiating with them to give access to our pharma, IT, ITeS, seafood and agri products companies. The presence of Indian banks would have helped Indian industries enter China. We're trying to put in place institutional arrangements to make access easier for Indian companies. What is the latest on ease of doing business After the initial burst of announcements, things seem to have gone quiet on this front How long will it take for India to break into the top 50 nations as envisioned by the Prime Minister No, the momentum has not been lost. An initial list of 98 conditions to improve the ease of doing business have been fulfilled by states. We have ranked all the states on the ease of doing business. Now, we're discussing another 340 different other issues affecting the ease of doing business with the states. I urge your readers to go online and check the dashboard on ranking. The cumulative aggregation of scores is done in a totally transparent manner. It is a dynamic system that ranks states on various parameters on a real time basis. This is generating healthy competition among the states and we expect to perform much better this year. (Last year, India's rank had jumped 12 places from 142 to 130). FDI flows have increased, reforms are underway and GDP is growing at a fast clip. Yet, not enough jobs are being created. How long will India have to wait for the feel good factor to return Investments typically create jobs with a time lag in most sectors. This has to be kept in mind. But the government's push towards job creation in the textiles and retail sectors and also in Tier 2 cities will begin to show results soon. There was a lot of disquiet over the manner in which Raghuram Rajan was hounded by a section of politicians. Do you think this has hurt India's image abroad Both the Prime Minister and the finance minister have spoken on the topic. They have said they respect what Raghuram Rajan has contributed to the RBI, just as they respect his decision to leave after competing this full term. And finally, what big changes will we see in the Indian economy over the next one year GST will be the next big thing. It will be a game changer for the Indian economy.

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