American businesses are lobbying with political parties here to build a consensus on stalled economic reforms such as liberalisation of foreign direct investment (FDI) in sectors like multi-brand retail, aviation and insurance, and for expeditious introduction of a Goods and Services Tax (GST).
The American Chamber of Commrece in India (Amcham) led a delegation for a meeting with Bharatiya Janata Party (BJP) president Nitin Gadkari last week, and pressed for opening of crucial sectors for FDI or raising the FDI cap, those in the know said. Representatives from Intel, Accenture, IBM, AT&T, Hewlett-Packard, Bank of America, Cargill, GE Transportation and Boeing India were among those present, as well as officials of the US embassy.
In the three-hour meeting, US representatives tried to get the principal opposition party on board regarding pending reform measures, sources said. They say Gadkari told them his party was ready to meet Prime Minister Manmohan Singh and finance minister Pranab Mukherjee to discuss FDI reforms, but the government does not approach the opposition to discuss these issues.
When asked, BJP officials said the meeting had discussions on over all macro-economic issues and not specific reform measures. They said Gadkari assured the US representatives that the fundamentals of the Indian economy were intact. They blamed India's economic downturn on governance issues rather than structural matters.
Indian economy grew at a nine-year low of 6.5 per cent in 2011-12, which could be attributed to external as well as domestic issues. In fact, the economy had grown at 6.7 per cent even in 2008-09, when the collapse of Lehman Brothers, the US financial services icon, had accentuated the global financial crisis. In 2009-10 and 2010-11, India’s economy expanded by 8.4 per cent each.
On GST, which the finance ministry claims would add one per cent to GDP or roughly Rs 1 lakh crore, Gadkari is learnt to have highlighted the concerns that states had expressed. In fact, Parliament's standing committee on finance had also said the Centre had not shown any urgency in convincing states to embrace GST, according to those in the know. The major indirect tax reform has already missed three deadlines due to differences between the Centre and states. Now, a constitutional amendment bill to enable a GST roll out is pending with the committee.
On FDI in multi brand retail, a BJP official agreed back-end supply management needed to be strengthened and said the party was trying to understand the issue in more detail. FDI in multi- brand retail was stalled even after the Cabinet's green signal to it, as both the Trinamool Congress, which is part of the ruling coalition, and the BJP were among the opponents. Amcham is also trying to meet Trinamool Congress supremo and West Bengal chief minister Mamata Banerjee but has not been able to do so, a chamber official said.
The government is still trying for a consensus on allowing FDI in Indian carriers. So far as the FDI increase in insurance investment is concerned, the Cabinet had earlier deferred even a diluted version of the Insurance Laws (Amendment) Bill, which sought to retain FDI in private insurers to the current 26 per cent. However, now the finance ministry is keen to see that this is raised to 49 per cent. It has asked for the item to be listed for a cabinet meeting.
After economic growth fell in the past financial year, India's industry chambers and other representatives of India Inc have been asking the government to expedite reform measures and give a boost to economic growth.