FDI INFLOWS AT A RECORD HIGH: MARAN
MEETING OF PARLIAMENTARY CONSULTATIVE COMMITTEE ON COMMERCE AND INDUSTRY HELD
Date : 11 Jul 2002
Location : New Delhi
India’s performance on the foreign direct investment (FDI) front has been both promising and reassuring with FDI inflows into the country registering a record high of US $ 4.06 billion (net of ADRs/GDRs) during the financial year 2001-02, which is about 65% higher than the FDI inflows received during the preceding year 2000-01 and further, this growth is being sustained during the current year 2002 as well, Shri Murasoli Maran, Union Minister of Commerce & Industry, said while chairing the meeting of the Parliamentary Consultative Committee attached to his Ministry here today. The Minister said that FDI inflows continued to post an impressive growth during 2002 with cumulative inflows during January-May 2002 (net of ADRs/GDRs) estimated at US $ 1.89 billion as against US $ 1.18 billion received during the corresponding period of 2001, thereby registering a substantial growth of 60%. Stressing that this had been achieved in a time when there has been a steep decline in global FDI inflows, Shri Maran said that "this is highly reassuring as it is a reflection of the investor confidence as also an acknowledgement of the progressive reforms being carried out by the government". The Minister quoted from The Economist of London, which in its recent issue had observed that "India is reforming more than it often gets credit for. Last year’s record inflow of FDI may be an acknowledgement of this".
Shri Maran announced that a Committee comprising representatives of Reserve Bank of India (RBI) and the Department of Industrial Policy & Promotion had been step up for adoption of the international reporting/computation system for FDI and said that the Committee would complete its work shortly. This has been necessitated by the fact that FDI figures of India currently do not include reinvested earnings and other direct capital flows which form part of FDI as per the international practices of IMF. A recent study conducted by the International Finance Corporation (IFC) had in fact said that adoption of international standards for computation of FDI would raise India’s net annual FDI inflows to about US $ 8 billion, which would work out to roughly 1.7% of India’s GDP, not far behind the 2% level achieved in China. The strong performance of FDI, the Minister said, was a result of recent policy initiatives taken by the government in terms of automatic entry, removal of caps in most sectors etc., as also the various investment facilitation measures contributing to improved investors confidence. The Foreign Investment Implementation Authority (FIIA) had been activated and on an average about 2000 responses in a year were being given to investors and potential investors, he said.
Interacting with the members on various issues, Shri Maran agreed with a suggestion mooted by Shri Kapil Sibal that the government should initiate a dialogue with the opposition parties to evolve a common agenda encompassing key issues such as labour reforms so that the country could achieve faster economic growth through a collective approach. Besides Shri Sibal, other members who participated were Shri P.C. Thomas, Shri M. Master Mathan, Shri Brahmanand Mandal, Shri George Eden, Shri R.S. Gavai and Shri Akhilesh Das. Shri Rajiv Pratap Rudy, Dr. Raman Singh, Ministers of State for Commerce and Industry, Shri V. Govindarajan, Secretary (IPP), Shri N.L. Lakhanpal, Secretary & DGFT and other senior officers of the Ministry of Commerce & Industry were also present.
Members called for bold initiatives on the agriculture front while underlining the primacy of agriculture in the country’s economy; exploration of new export markets notably Africa and greater involvement of States and agencies in the formulation of trade and economic policies. Shri P.C. Thomas and Shri Master Mathan and others highlighted the difficulties faced by growers due to continued to fall in commodity prices including items like tea and stressed the need to ensure remunerative returns to growers by exploring new export markets for tea, rubber etc. The Committee was informed that following a meeting with RBI and the Department of Commerce rescheduling of loans had been approved for coffee including 2 year moratorium on payment of principal while RBI had directed the concerned banks to come out with a similar package for tea which was expected to be finalised by this month end. A 5-year Medium Term Export Strategy for tea was being prepared by Tea Board through M/s. Accenture based on a study of competitiveness of Indian tea.
On the country’s economic performance, Shri Maran referred to RBI estimates of the likely GDP growth of 6% to 6.5% during 2002-03 in comparison with the growth of 5.4% in 2001-02 and 4% in 2000-01, and NCAER survey showing that business confidence index had gone up by 10.8% this year. He said that the 5-year Exim Policy had been formulated with the objective of raising India’s share of international trade to at least 1% from the current level of 0.67% and special efforts had been made to encourage exports of more employment generating sectors like agriculture, SSIs etc., besides a series of steps to take Indian exports higher up the value chain. The process of involvement of state governments had also been strengthened with a substantial 10th Plan provision of as much as Rs. 1725 crore. Giving an update on the Special Economic Zones (SEZs), the Minister said the Positra SEZ (Gujarat) had completed financial closure; Nangunery SEZ (Tamil Nadu) was about to take off with acquisition of land and financial closure; Dronagiri (Maharashtra) was in an advanced stage and in Kolkata, the gem & jewellery park at Manikanchan had been given the status of SEZ. In all, 13 SEZs had been set up so far.
Referring to the industrial scenario, the Minister informed that there had been an improvement in the production of the Six infrastructure industries, which reflected a growth of 5.8% in April-May 2002 as against only 1% in April-May 2001. "The growth rate in production is particularly noteworthy for Cement (10.1%), petroleum refinery products (8%) and finished steel (6.4%%). The Society for Indian Automobile Manufactures (SIAM) has also reported a quantum jump in May 2002, in the sales of motorcycles by 51% and of commercial vehicles by 44%. These two reflect the improved demand from rural areas and the growing demand for freight movement", Shri Maran said.