In an exclusive conversation with CNBC-TV18’s Shereen Bhan, DIPP Secretary Amitabh Kant spoke on the government’s decision to liberalise foreign direct investment policy in various sectors.
“India gets almost 92 percent of its FDI under the automatic route. Our objective is to take it to about 95-96 percent, said Kant.
Below is the verbatim transcript of Amitabh Kant’s interview with Shereen Bhan on CNBC-TV18.
Q: Could you throw more light on the thought behind relaxing the FDI reforms?
A: Extremely simple extremely easy and I personally feel that this is a huge opportunity for construction companies because many of the constructions going round in India they are either about 60 to 70 percent complete. There is a lack of liquidity so we can allow foreign direct investment (FDI) to come in a big way. You can come in and get to do major projects like Smart Cities, townships and to different phases. If you have completed your projects, it is not real state you can sell it off. Get an operator from abroad who can buy it over and run it. So, as far as construction is concerned India is really opened up the entire regime.
Q: This is really in order for you to be able to provide liquidity in sector; it is a cash strapped sector. It continues to suffer from that. We haven’t really seen a pick up as far as a real estate market is concerned. So, was that really the driver because you had made these changes in October last year? At least some of the relaxations had come in and now you have opened it up completely but last year changes didn’t seem to have worked which is why you felt the need to do this?
A: FDI policies are continuous process of evolution. You have to constantly learn; you have to constantly interact with private sector. You have to evolve and grow and expand and for us this particular policy has been a learning process and we thought we have brought in radical changes across several aspects of single brand putting aspects of defence and automatic.
So, the broad philosophy has been to try and put as much possible under the automatic route. Try and see how much, there is very little difference between 26 and 49 percent. Try and take 26 to 49 percent, try and take 74 to 100 percent but the broad philosophy is keep government out of everything. So, try and see as much as you can do put everything under the automatic route.
India gets almost 92 percent of its FDI under the automatic route. Our objective is to take it to about 95-96 percent.
Q: Let me ask you about the sectors where you haven’t actually moved – in broadcast media finally, it has been over a decade, long wait, you have finally decided to hike the FDI limit but in print media you have retained the cap why is that? I mean this is the digital world you can download financial times on your mobile phone if you like.
A: As I said, there were wide ranges of recommendations from the Telecom Regulatory Authority of India (TRAI). We have acted on almost all of them. The only thing which is not being considered at this particular stage is print media.
Q: That means it could be something that you would look at?
A: That is for the political system. It is a political call.
Q: What are the reservations? As I said you can download anything on your mobile phone what is the problem?
A: It is an issue which needs to be discussed, debated, considered and a final decision taken at the cabinet level. So, I would not like to comment at this particular stage but at this right now the print media has been kept intact at 26 percent.
Q: Let me ask you about banking because there you have now brought in the composite cap which hadn’t been the case earlier. It will of course open headroom as far as most private sector banks are concerned. There was also a consultation under way on what you do with FDI and public sector banks and were the public sector banks should be at parity with private sector banks when it comes to FDI. Where do things currently stand on that?
A: We have brought in fungibility in two sectors defence and banking. Banking it makes logical sense simply because nobody can hold more than 5 percent equity, so we took it up to 74 percent and we said you can bring in either FDI, foreign institutional investor (FII) and foreign portfolio investment (FPI) etc. However, as far as public sector banks are concerned, I think the banking division will have to take a call. The finance ministry will have to take a call.