In an interaction with Nayanima Basu, Department of Industrial Policy and Promotion (DIPP) Secretary P K Chaudhery said his department had received valuable inputs on the issue of liberalising foreign direct investment regime in single-brand and multibrand retail trading from key ministries. Edited excerpts:
What is the exact status on allowing FDI in multibrand retail and increasing the FDI limit in single-brand retail to 100 per cent?
We had initiated an inter-ministerial discussion both on multibrand retail and single-brand retail. We have received comments from almost all the major ministries, though some of them are still left. However, I will not be in a position to comment on which ministry suggested how much FDI limit. The Committee of Secretaries had taken a decision on this in July of allowing 51 per cent FDI in multibrand retail. Finally, the Cabinet will now have to take a call.
Recently, the civil aviation ministry said the government is likely to take a decision in two weeks’ time on the extent to which it will allow foreign airlines to pick up stake in the Indian carriers. Is the Cabinet note on this ready?
We have received the proposal from Civil Aviation, which suggested 24 per cent FDI that foreign airlines can pick up stake in domestic carriers. We are examining it.
We will take a decision based on what we consider is the best possible option at this point in time — and, accordingly, we will prepare the Cabinet note. The Cabinet note is yet to be circulated. But we will make up our mind on what needs to be done in terms of FDI in aviation.
We will then circulate the note within the ministries concerned and then put it up for the Cabinet. We propose to circulate the note shortly within the ministries for their views. Then we will consolidate it and then move the Cabinet. I will not state DIPP’s stand on this.
Coming to the National Manufacturing Policy (NMP), how do you see states acquiring land for setting up the NIMZs (national investment and manufacturing zones)?
First, the immediate NIMZs are going to come up in the area that is developed for the DMIC (Delhi-Mumbai industrial corridor), where the state governments have already acquired land. So, the NIMZs will take off quickly. Second, the NMP is the framework that lays down the possibility; it is not a mandated thing.
Don’t you foresee the rise of same issues and problems as what happened for acquiring land for SEZs (special economic zones)?
There is a difference between NIMZs and SEZs. In a SEZ, there is a minimum area stipulation and there is also a contiguity norm because it is supposed to be a bonded area — unlike NIMZs.
The existing brown-field areas, which are already developed, can become part of NIMZ. So, NIMZ will create integration rather than a separate creation. There can be the need for a separate land. The key drivers in this are going to be the state governments.
What about the labour laws? Is it true that the NMP is not at all labour-friendly?
In terms of the exit policy, there is no national decision on hire-and-fire. In the NMP, the exit policy has been recast to make it more labour-friendly yet avoid litigation in future. So, we have made the current exit mechanism friendlier both for labour and companies. The labour ministry had certain concern areas; they were all taken care of.
What has been feedback from the state governments on the new NMP?
I have written to all the chief secretaries of the states for their feedback and for them to seek clarifications and take advantage of the policy framework. Gradually, we need to work more closely with the states and go beyond the DMIC watershed.
Why is it that we are seeing an increase in FDI inflows this year compared to last year even if there is slowdown in all the sectors?
There are various factors that determine the share you get out of the global FDI inflows. Then there are various other factors such as the size of the market, growth of the economy, an investor-friendly policy and a stable policy environment.
Now, we figure very strongly in all these factors. So India is a natural choice for all investors as FDI destination. But we need to constantly work at making our industry more competitive. This is where the innovation and manpower comes into play. Yes, there is slowdown in economic growth. But this is not just in India; slowdown is there globally. We are expecting that we will maintain our growth in the coming period.
What is DIPP’s view on a sluggish growth of industry as indicated by the IPP (index of industrial production)?
The IIP has not gone down uniformly in all sectors. Some sectors have not been affected. Well, DIPP can only take care of the micro problems facing the industry.
On the macroeconomic front, DIPP has got very little role to play in terms of capital formation and investments. Micro problems would vary from industry to industry. We will aggressively seek to address those micro problems in the coming months. In terms of the long-term initiatives, the National Manufacturing Policy has a major role to play. This will boost the industry.
Do you see FDI inflows getting impacted in the long run due to tightening of interest rates? What effect do you see on domestic industries due to this?
If the foreign investor is coming with tight funds, then they are coming with cheap capital, too. So, it does not impact. But if the FDI is coming and the investor is looking at the cost of capital in India, then it is going to be important that the return which they get is higher.
As far as the domestic industry is concerned, a lot of companies are holding back their expansion plans. Companies have told us that it is affecting their decision of capacity expansion.
