Jaswant firm on FDI in retail

RBI managing real effective exchange rate well, says FM.

Finance Minister Jaswant Singh has said he is committed to permitting 26 per cent foreign direct investment (FDI) in retail trade.

"It is part of our agenda and we are committed to it," Singh told Business Standard in an interview on Friday, a day after Prime Minister Atal Bihari Vajpayee released the National Democratic Alliance manifesto.

The 26 per cent FDI limit in insurance also would be revisited, he said. Dismissing notions that foreign retail brands would dislodge Indian brands from the market, Singh said the NDA was considering only 26 per cent FDI and not handing over the entire retail trade. "The Indian sherbeth is still there despite Coca-Cola and Pepsi. Our experience is that the Indian brand has great strength," he said.

The finance minister also strongly defended the policy on the rupee. Allaying exporters' concerns over the 10 per cent-plus appreciation of the rupee against the dollar over the last 12 months, Singh said the appreciation should not be simply looked at in relation to the dollar.

It was the real effective exchange rate (REER) that one must look at. The Reserve Bank of India, according to him, was managing the REER extremely well. "There is no need to be paralysed into anxiety because the RBI is keeping a very responsible and watchful attitude to it," Singh said.

The minister was also bullish about the continuation of the disinvestment process during the current fiscal and the coming years.

He said it was possible to raise Rs 100,000 crore from the market every year through disinvestment of the government's stake in public sector undertakings. "When my distinguished colleague Arun Shourie says that the government can raise Rs 100,000 crore a year, it can be raised. I believe the market has the ability. This is not any off-the- cuff figure," Singh said.

The minister said India had the potential to grow at double-digit rates in the coming years. In 2003-04 itself, he said, the economy would grow over 8.1 per cent. "Double-digit growth rates are possible in a single-digit number of years," Singh said. He added that the NDA agenda was no fiction but a commitment, and if voted to power, the government would fulfil all the promises made.

On further liberalisation of the foreign investment policy, Singh said personally, he did not think there was a need for the Foreign Investment Promotion Board (FIPB). But it was not a decision that the ministry of finance alone could take. "There are a number of interconnected regulations or restraints that need to be realigned. The FIPB is now part of the finance ministry and we have made it a green channel as much as we can. I will begin examining its vital importance," Singh said.

As far as the NDA's agenda to reform the Planning Commission was concerned, Singh said the commission continued to serve a very important purpose. "It plays an important role in helping and assisting the economy of the country's federal structure," he said. However, the world had considerably changed during the last 50 years and there was a need to take a fresh look at the commission's structure and functioning, he said.

He also defended the NDA promise of creating another ministry of international trade. "There is internal commerce, commercial activity and there is international trade. I don't say they are rival or competing functions. But they are two different functions," he said, adding that the complexities of World Trade Organisation negotiations were varied.

The Agenda

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• Double-digit GDP growth rates in a single-digit number of years
  
• No need for an organisation like the FIPB; Planning Commission to be reformed
  
• Ministry of international trade to address WTO complexities
  
• Insurance FDI issue to be revisited