Interview: Suresh Prabhu, Commerce minister
Alot of our investment is driven largely by FDI. You have been interacting with domestic industry. What sense are you getting? When can we see them investing? What are you telling them?
There are two-fold issues related to domestic investment. One, at a macro level, we must promote domestic savings. Second level issue is micro, of excess capacity. Then is the issue of corporate balance sheets which are under stress because of legacy issues. First time we are seeing deleveraging has started happening and corporate balance sheets are better than what they were. It is a slow process because legal implementation of deleveraging will take time. This process has started but there are certain issues like regulatory challenges. We have set up a committee chaired by DIPP secretary to look at regulatory issues because the ultimate idea is that regulation should not stifle the possibilities of investment. I get a sense now that people have again started looking at investments. I can definitely see an improvement in the domestic climate.
India’s exports have not done well at a time when global demand is rising. Is it because of rupee or cost of capital?
Weaker currency significantly contributes to export. Most of the large exporting countries like China, Japan and Korea have also kept their currencies very weak by design. Second issue is that of cost of capital. So, the interest rate is an issue. Certain disadvantages like the cost of infrastructure and logistics is an issue. We have now started looking at new markets and new products. Till 2008, global trade was moving faster than global economy, GDP growth. 2008 onwards, the global trade expansion is far less than global economy. So, we need a strategy that will immunise Indian exports against these headwinds.
What about traditional sectors like carpets, textiles where exports have been hit?
Textiles in particular, we have one segment of garments which is facing some difficulties. We are going to give little more incentives to them very soon. Then there is pharmaceuticals which we should not call so traditional but we have been exporting quite a bit over a period of time and then commodities like spices, tea, coffee. We have asked the tea board, spices board, coffee board to come out with a market strategy. That is what we have started working on and that is the only way we can address this challenge.
We are facing competition in exports and investment from Asian countries like Indonesia, Philippines. How do we deal with this?
We must identify products and why are they facing competition. There are a large number of countries where markets are open and India has invested in the past strategically geopolitically, by putting human resource or money. A host of strategies have to be put in place.
Do we need to make changes in our tax and regulatory framework when we compete with these countries for foreign investment?
I don’t think investment is a problem. Regulatory framework for sure. Industry will grow only when there is least regulation. The India story is entrepreneurship. On investment, the interest in India is unprecedented. I would call it the highest ever.
What about taxation?
Tax is something we have to do bilaterally... and the finance ministry is aware of this. They are working on it. The Goods and Services Tax will also help us to reduce our tax burden. Ultimately, it is a challenge for every finance minister to balance the books also. We have to increase the tax to GDP ratio. This will happen because of GST and also demonetisation.
What is our strategy on WTO?
We are very clear on WTO. I’ll talk of WTO in two parts — till Buenos Aires and after that. For Buenos Aires, what are four-five issues likely to come up and already being discussed — public stockholding, fisheries subsidies, e-commerce and market access for agriculture particularly domestic support. I have told all experts and stakeholders to work beyond Buenos Aires. If India is going to be $5-trillion economy, then contribution of global trade to GDP is important. We must focus on foreign trade as a strategy. I told IIFT and Centre for WTO Studies to get experts and prepare in maximum three months’ time, a strategy about what is that we need to do to promote global trade so that our GDP rises faster and in that what is the role of multilateral, plurilateral and bilateral negotiations.
Do we expect an outcome on these our issues?
The big outcome of Buenos Aires should be that we continue to engage with rest of the world through the multilateral platform because there are some countries questioning the efficacy of WTO itself.
What is our strategy for e-commerce?
E-commerce is an issue that needs a lot of deliberation. It is already a part of 1998 work programme so we can put it into some kind of an accelerated work programme. To come to a negotiation level, we need to have a proper understanding about the issues. Rather than adding new issues everyday... keeping too many things on the plate can confuse everybody and not have any outcome.
There is some unfinished agenda on FDI front. When can we see some movement?
FDI is pretty much open. Sectoral caps are gone in most cases. I don’t see anybody saying that any restrictions in India is an issue. But if there is any specific issue, we will look into it.
There was some thinking in retail to expand food retail?
If there is any specific proposal coming from any specific ministry, we can look into that but today I see the growing interest in India and that is showing in the numbers.
What is the ministry’s thinking on free trade agreements (FTA) how should they be negotiated?
We must have a proper standard operating procedure for FTAs in which we must clearly identify the stakeholders and affected parties because every FTA has losers and gainers. Having an FTA is not a problem as long as you bring in the element of India must also benefit from it angle.
Apple has been negotiating with India for relaxations in policy. Is there a final decision on the matter?
Apple must submit a concrete proposal and then we will examine it.
Investment not a problem, but we need to tackle regulatory hurdles: Suresh Prabhu, Commerce Minister
economictimes.indiatimes.com
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- South Korean conglomerate Lotte Group and French automotive group Peugeot SA have discussed proposals to invest as much as $6 billion combined in India, a move that would boost Prime Minister Narendra Modi’s attempts to attract foreign capital in Asia’s third- largest economy, a person with direct knowledge of the matter said.
Lotte may invest between $3 billion and $5 billion in the next five years, the person said asking not to be identified as the proposals are preliminary. The South Korean firm intends to invest in retail, chemicals, food processing and real estate, as well as develop railway platforms in the country, the person said. Separately, PSA Group, the maker of Peugeot and Citroen cars, plans to spend about 1 billion euros ($1.2 billion) to build a car factory and an engine plant in southern India, the person said.
Modi’s flagship "Make in India" plan encourages foreign firms to manufacture locally by offering easier land acquisition, pruning the number of approvals and, in some cases, offering incentives. The efforts have helped India move up in the World Bank’s ease of doing business survey and achieve an unexpected credit rating upgrade last week by Moody’s Investors Services.
"Lotte is exploring various business opportunities in India and other countries, but there is nothing confirmed or discussed in detail as to which areas to enter and how much money to invest," Lotte said in a statement. A Paris-based spokesman for PSA referred to a statement in January on the cooperation with C.K. Birla Group in India, which included an initial investment of 100 million euros.
Lotte plans to develop urban real estate by adopting railway stations and maintaining them, the person said. In return, the railways will allow the South Korean firm to operate restaurants, hotels and shops, the person said. The confectionery arm of Lotte is in the process of setting up a new factory in India, according to the person.
Modi’s plan encourages foreign firms to manufacture locally by offering easier land acquisition, pruning the number of approvals and, in some cases, offering incentives.
The Indian government is discussing more than 550 foreign investment proposals worth about $85 billion, offering competitive terms to companies and ensuring uninterrupted supply of power and water to plants, the person said. The proposed projects include setting up factories in the areas of food processing, electric vehicle components and electronics among others, the person said.
REPLY Nov 24, 2017 REPLY Nov 25, 2017 - We will ensure that the outcome of the World Trade Organisation (WTO) Ministerial Meet in Buenos Aires next month does not go against the interests of India, said Suresh Prabhu, Commerce and Industry Minister.
Adopting a consultative approach with the trade and industry as well as the Finance Ministry, Prabhu believes that it is better to have a focussed strategy in place for Foreign Trade Policy rather than give numbers.
In conservation with BusinessLine, the Minister talked about a range of issues including India’s stand on the on-going trade negotiations, the export and industrial growth strategy under works and the need to balance the interest of producers and user industry. Excerpts:
With the WTO Ministerial meet just two weeks away, how is the Ministry tackling the increasing pressure on India to soften its position in important areas such as public stock holding and e-commerce?
We are not worried about that. India will not concede its position. We are sure about what our interests are. Whether it is public stockholding, fisheries subsidies, e-commerce or any other important issue, our interests will be properly safeguarded. Whatever the outcome of the WTO, it will not be against India’s interests, that we will make sure.
The domestic industry is concerned about the on-going negotiation on Regional Comprehensive Economic Partnership and the possible tariff cuts on a large number of goods from 15 countries plus China. How will you address these concerns?
We will definitely make sure that all concerns of domestic industry will be taken on board while articulating or negotiating positions at RCEP. China is a part of the 16-member RCEP, so obviously whatever is being negotiated will apply to it as well. We have assured the industry that our domestic concerns will be taken care of.
How far has work progressed on the review of the existing Foreign Trade Policy?
What we are trying to do is to focus on the strategy that we will put in place. Giving numbers in isolation has no meaning. Numbers is the outcome of a strategy. If you focus on strategy properly, it will result in numbers. I am convinced that the strategy we are building will give us results.
I had recently sent the Commerce Secretary to Africa. She met a number of neighbouring countries around Uganda. The result is phenomenal. We had gone with a team from the Exim Bank, the ECGC, a Japanese bank and DFID. That is the new approach we are adopting. We are not just engaging bilaterally.
But, if you ask me when the results will be seen, I can’t say what will be the response to the approach and whether results will be noticed from next month. What I do know is that until you don’t put strategy in place, outcome will not come.
How seriously are you pursuing the market diversification drive?
Central America and Latin America are two markets with great potential. I had recently gone to Cuba and Panama. I talked to the industry there. While goods don’t speak a language, services do. So if we want to send services to that part of the world, you have to have a regional centre. We are thinking of making Panama the regional centre. As soon as I came back I asked Nasscom to send a delegation to Panama. It is up to them to do so. At best what I can do is promote. But, to actually export is the job of the industry.
So you think there is a lot of opportunity to increase services export in Latin and Central America?
Oh, yes. There is hardly any services export to Latin America and Central America at the moment. But, exports to North America are good. However, there is stiff competition in that market. There are also entry restrictions such as high visa fee. While we are pursuing that issue and in a recent meeting I asked the US Commerce Secretary and the US Trade Representative to relax it, but the point to ponder is whether we should focus only on one market. Should we not explore other markets? Should we promote only goods or also services?
Did the USTR and the Commerce Secretary give any assurances on redressing the issue of high visa fees for professionals from India?
Issues related to US visa are dealt by the homeland ministry and other ministries. The USTR and the Commerce Secretary said that they have to take it up with them. PM Modi also took up the issue subsequent to that when he met US President Trump on the sidelines of ASEAN.
When can we expect the new industrial policy?
We are virtually ready with the draft. But, we are not going to announce it casually. We will have wider consultation. One component of the policy is reducing the regulations. So I have asked the DIPP Secretary (who is chairing the committee on reducing regulations) to do it quickly.
Industrial policy should reduce regulations. India’s growth story is private sector driven. If I put too many restrictions and ask industrialists to come and meet me every now and then for various clearances, where is the time for them to do business?
Is the government going to go ahead with the imposition of anti-dumping duties on import of solar panels and modules?
When you make trade related decisions, there is always a trade-off. You may be trying to protect the domestic industry, but there are other users of that industry. Another example of this could be the issue of imposition of anti-dumping duties on steel (being pushed by steel producers).
However, steel users say don’t impose that duty as it does not help us. That is a big challenge. I want to see domestic production going up but at the same time there are down stream users who are against it. We have to balance it. We will have a quasi judicial process to settleNov 26, 2017i REPLY Dec 4, 2017
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