There is tremendous potential in India-Germany economic collaboration. Germany ranks seventh among foreign investor countries in India. About 600 Indo-German joint ventures are already operating in India. However, as of now, our economic partnership remains below our full potential. We are particularly keen to develop the sectors where Germany is strong. We are working hard to create conducive conditions for the same.
Friends, at a time of global slowdown, India represents a bright spot for investments. We are fortunate to be sailing in the right direction. The recent data on global economic activity reinforces this assertion. However, we cannot afford to be complacent. We are committed to doing everything possible to convert these analyses into reality.
With a very open and global mindset, we have worked aggressively in the last 15 months to make India an easy place to do business. We are committed to creating favourable conditions for business and industry because we believe that they are necessary for improving the lives of ordinary citizens in India. A recent study conducted with the help of the World Bank Group has brought out the urgency among our provincial governments on ease of doing business. They are moving hand-in-hand with the federal government in this direction in a true spirit of cooperative and competitive federalism. In fact the provincial governments have now entered into a healthy competition among themselves to ensure that a transparent, predictable and user-friendly regulatory mechanism is quickly put in place.
Friends, one of the biggest challenges in India today is to productively employ our youth. For meeting this challenge, we need to provide a huge push to manufacturing, which has stagnated at around 16 per cent of the GDP for several decades in India. This percentage must reach around 25 in the short and medium term. With this in view, we have launched the 'Make in India' initiative.
To make it a success, apart from vigorous implementation of measures for ease of doing business, we have fast-tracked approvals and clearances for industry and infrastructure. Transparent auction and allocation of spectrum and of key natural resources like coal, iron ore and other minerals in the last 15 months have created a level playing field for investors.
We are aware that our domestic financial resources are not sufficient to meet our needs. Therefore, to enhance the flow of foreign investments, we have liberalised the FDI regime allowing 100 per cent FDI in railways and enhancing the FDI limit to 49 per cent in defence and insurance. We have also refined our FDI policy for construction and medical devices. We have rationalised a number of other FDI-related policy issues, including bringing in the concept of composite sector caps for the FPIs and other investors.
We are keen to build futuristic physical and social infrastructure. Through self-imposed discipline in the management of our financial resources, we have been able to allocate more resources for infrastructure sectors. In addition, we are setting up an India Investment and Infrastructure Fund. We have targeted an annual flow of Rs 20,000 crore (which is approximately euro 2.7 billion) into this fund from our own resources. We are putting in place a professional team for asset management.
We have also come up with the mechanism of tax-free infrastructure bonds for projects in rail, road and irrigation sectors.
There were a number of regulatory and taxation issues which were adversely impacting the sentiments of foreign investors. We have taken very decisive steps to remove a number of long pending concerns of investors.
To give you some examples: We have expedited regulatory clearances including security and environmental clearance; Across the board, we have increased the validity period of industrial licences; We have de-licenced a number of defence items and liberalised a number of restrictions like end-use certificate; We have increased the validity period of defence industrial licences up to 18 years from three years; We have clearly articulated that we will not resort to retrospective taxation and reinforced this position by not going for imposition of Minimum Alternate Tax on FPIs; We have notified the regulations for the Alternative Investment Funds allowing foreign investments in such funds; We have rationalised the capital gains tax regime for Real Estate Investment Trusts; We have modified the Permanent Establishment norms; We have also decided to defer the implementation of the General Anti-Avoidance Rules for two years; We have introduced the GST Bill in Parliament; we are hopeful to roll it out in 2016; We are working on a new bankruptcy code; the Company Law Tribunal is soon going to be formed.
We want to make sure that our tax regime is transparent and predictable. We are also keen to see that genuine investors and honest taxpayers get quick and fair decisions on tax matters.
As a result of our initiatives, the sentiments for private investment and inflow of foreign investment have turned positive. The growth rate of our GDP is above seven per cent. FDI inflows have gone up by 40 per cent compared with previous year's corresponding period.
Many international financial institutions, including the World Bank, IMF, OECD and others, are predicting even faster growth in the coming years. Moody's have upgraded the rating of India as positive.
India has improved its UNCTAD ranking of investment attractiveness. Against 15th so far, now we are at 9th place. India has also jumped 16 places on the World Economic Forum's global competitive index after five years of decline in the list. Similarly, in a ranking of the top global destinations for greenfield investment in the first half of 2015, India is at number one. Foreign Policy magazine of USA has ranked India as number one FDI destination. Thus, just in 15 months, we have successfully restored the credibility of India in the eyes of global players.
I have always said that government has no business to do business. Hence, through PPP or otherwise, we are encouraging private investments in areas where earlier only the government used to invest. We are also divesting our stake in the public sector enterprises, to instill market discipline.
Friends, I want to assure you that India is committed to protecting intellectual property rights (IPR) of all innovators and entrepreneurs. We have taken several initiatives for transparency and online processing in IP administration. A comprehensive National IPR policy is being finalised. Last week I myself reviewed the situation. I can say that this will be a progressive, and forward-looking policy.
Friends, we want your active involvement in translating our dreams into reality. Our commitment and aggressiveness to achieve the goal in a faster and effective manner offers immense opportunities to German companies. These opportunities range from building 50 million houses to setting up 100 smart cities; modernisation of our railway network and stations to setting up of new railway corridors; generation of 175 Gw of renewable energy to construction of transmission and distribution networks, national highways, bridges, and Metro rails. Such a huge potential for creation and production will not be available in any one country. More importantly, no one place on the earth can offer the potential for consumption on such a massive scale.
Edited excerpts from Prime Minister Narendra Modi's address at the Business Forum in honour of German Chancellor Angela Merkel, organised by Nasscom and Fraunhofer Institute, in Bengaluru, October 6, 2015
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
