Restoring India's credibility globally

One of the biggest challenges in India today is to productively employ the youth. For meeting this challenge, we need to provide a huge push to manufacturing which has stagnated at around 16 per cent of GDP (gross domestic product) for several decades. This share must reach around 25 per cent in the short and medium term. With this in view, we have launched the Make in India initiative. We are working on all fronts to make India a global manufacturing hub.

To achieve this objective, apart from vigorous exercise for ease of doing business, we have fast-tracked approvals and clearances for industry and infrastructure. The hallmark of our strategy now is policy-driven governance. Measures like transparent auction and allocation of key natural resources like coal, spectrum, iron ore have created a level playing field for investors.

To enhance the flow of foreign investments, we have liberalised the FDI (foreign direct investment) regime allowing 100 per cent FDI in railways. We enhanced the FDI limit to 49 per cent in defence and insurance. We are also conscious of the last-mile operational issues in such policies. In that spirit, early this week, we have carried out substantial changes in the FDI regime across 15 sectors.

To give an example: now there are just no restrictions in the FDI policy for the construction sector. Similarly, very radical liberalisation has been done in sectors like plantation, e-commerce and single-brand retail. Moreover, we have now brought most of the FDI proposals under the automatic route.

With this round of reforms, I can say that India is among the most open countries for foreign investments.

Infrastructure is another big challenge for India. We are keen to build futuristic physical and social infrastructure. Through self-imposed discipline in financial management, we have been able to allocate more resources for infrastructure sectors. In addition, we are setting up an India Investment and Infrastructure Fund. We have targeted an annual contribution of $3.5 billion into this fund from our own resources. We are putting in place a professional team for asset management.

We have also come up with the mechanism of tax-free infrastructure bonds for projects in rail, road and other sectors. We will work together with the British government, industry and the financial markets to deepen our relationship and harness their interest in India's infrastructure. Very soon, these bonds will become strong instruments for engagement between our financial markets.

Friends! There were a number of regulatory and taxation issues, which were adversely impacting the sentiments of foreign investors. We have taken very decisive steps to remove a number of long pending concerns.

To give you some examples: We have expedited regulatory clearances, including security and environmental clearances; We have increased the validity period of defence industrial licences up to 18 years from three years previously; We have taken almost 60 per cent of the defence items out of the licensing process and liberalised a number of restrictions like end-use certificate for the exports; We have clearly articulated that we will not resort to retrospective taxation and demonstrated this position in a number of ways. This includes not going for imposition of Minimum Alternate Tax on FPIs (foreign portfolio investments); We have introduced the concept of composite sector caps for FPIs and other foreign investors; We have notified the regulations for the alternative investment funds; We have rationalised the capital gains tax regime for real estate investment trusts; We have modified the permanent establishment norms; We have also decided to defer the implementation of the General Anti-Avoidance Rules for two years; We have introduced the GST Bill in Parliament; we are hopeful to roll it out in 2016; We are working on a new bankruptcy code and the Company Law Tribunal is soon going to be formed.

Friends! We want to make sure that our tax regime is transparent and predictable. We are also keen to see that genuine investors and honest taxpayers get quick and fair decisions on tax matters.

As a result of our initiatives, the sentiments for private investment and inflow of foreign investment have turned positive. FDI inflows have gone up by 40 per cent compared with previous year's corresponding period. India has been recently ranked as the most attractive investment destinations by Ernst & Young. In a ranking of the top greenfield investment destinations in the first half of 2015, India is at number one. Foreign Policy magazine of USA has ranked India as the number one FDI destination. In a study of 100 countries on growth, innovation and leadership, India has been ranked number 1 by Frost & Sullivan. India has improved its Unctad ranking of investment attractiveness from 15 to 9. India has also jumped 16 places on the World Economic Forum's global competitive index. Moody's has upgraded the rating of India as positive.

Thus, just in 18 months, we have successfully restored the credibility of India in the eyes of global players. Through PPP, we are encouraging private investments in areas where earlier only the government used to invest. We are also divesting our stake in public sector enterprises, to instill market discipline. We are keen to learn from your experience in structuring and implementing PPP projects.

I am personally convinced and want to assure you that India is committed to protect intellectual property rights (IPR) of all innovators and entrepreneurs. We have taken several initiatives for transparency and online processing in IPR administration. A comprehensive National IPR policy is being finalised.

Edited excerpts from Prime Minister Narendra Modi's address at the Indo-UK Business Meeting at Guildhall, London, November12, 2015