Foreign investment needed for India's devp startegy
New Delhi, Mar 3: Finance Minister P Chidambaram today (Mar 3, 2006) beckoned the US business community to bring in their 'money, technology, managerial and management skills' for investing in India, saying that the Government would want four per cent of the GDP to come from foreign investment and has a conducive policy environment in place to ensure high sustainable profits.
"We want your money. Those who have the money also have the technology. The world class and size American companies also have good governance, good managerial and management practices. If they come to India, they will impart this to us," Mr Chidambaram said inaugurating the 'Indo-US Economic Cooperation' conference.
The event has been organsied by CII-US India Business Council and is being attended by American CEOs accompanying US President George Bush on a visit to the country.
"We feel foreign investment will be extremly beneficial to India," Mr Chidambaram quipped and explained the logic as to why this was so.
The Finance Minister said growth was a function of the quantum of investment and the efficiency of its use. India's savings rate is 29 per cent of the GDP and investment rate of 30 per cent of the GDP.
This enables a growth rate of 7-8 per cent per annum.
For India to step up this growth rate to ten per cent, domestic savings need to be supplemented with foreign savings and investment.
Besides, private savings have an efficiency level higher than that of the Government.
Mr Chidmabaram said trade and investment are a two-way affair and if American companies invest in India then this will open the US markets to Indian goods.
And in the ultimate analysis it will open the doors for Indian companies to take over American companies in the United States as also set up more start up projects, Mr Chidambaram said referring to the growing trend of outward flow of FDI from India.
The Finance Minister said India has achieved an eight per cent growth from where it will be possible to repeat this on a sustained basis.
"There are all kinds of opportunities for investing in India. The country wants US investors," Mr Chidambaram said but explained the constraints of moving faster on reforms resulting from the nature of Government, a democratic coalition.
"Just be patient," Mr Chidambaram remarked and said he understood the logic of foreign business seeking a hike in FDI limits in the Financial sector, particularly investment.
"The 26 per cent cap on Insurance was not an entry barrier but possibly a barrier for expansion of business," Mr Chidambaram said.
Mr Chidambaram said insurance was still an untapped market in India, with a penetration level of only ten per cent. "As I go on, I hope I will be able to persuade Parliament to amend the Insurance Bill," Mr Chidambaram said. Amendments to the Insurance Regulatory Development Authority Bill, which will give effect to the Cabinet's approval of hiking FDI caps in insurance from 26 per cent to 49 per cent, require a Parliamentary approval.
The Finance Minister said the second phase of banking sector reforms will take place in 2009.
The Finance Minister said there was a sea change in India now from what it was 20 years ago and now and would be vastly different 20 years hence.
"India is brimming with confidence," Mr Chidambaram remarked.
He cited a survey by A T Kearney which listed China, India and US, in that order, as the most sought after destinations for FDI.
Mr Chidambaram said translating an eight per cent growth in physical terms would mean eight million jobs every year, laying down 1,000 km of roads a year, an additional 10,000 MW of power every year and 50 million new telehone connections a year.
This would enable many more people to travel by roads, build capacity to put more children into schools and provide many more young people an opportunity to compete globally.
For the US, this would mean great opportunites to invest in roads, ports, seaports, insurance, banking and leveraging your knowledge power in the colleges and universities. The knowledge resources of the US and India's human resources would make a formidable combination.
The Finance Minister said the Budget indicates a plan for making India a manufacturing a hub for small cars. "We want to see India made cars in every country," he said.
Mr Chidambaram also dwelt on the polices of the United Progressive Alliance (UPA) Government and the Budget proposals relating to various sectors, including expressways, leather, gems and jewellery, textiles and power.