Trade bodies want greater FDI, clarity on ecommerce
08 January 2016
The government should further ease foreign direct investment (FDI) norms, especially in sectors such as multi-brand retail, education and ecommerce where its stance has been ambivalent till now, the country's leading industry associations have demanded. They also sought more liberal norms for the insurance industry.
In a pre-Budget meeting with the commerce and industry ministry on Thursday, corporate India also raised concerns on the ''adverse'' impact of Free Trade Agreements (FTAs) on local manufacturing and demanded support to boost manufacturing, exports and startups.
They said FTAs have led to import surges as a consequence of lower / nil duties.
''We heard the industry's perspectives on what the Centre and the state governments can do to boost investment, manufacturing, exports and startups,'' commerce and industry minister Nirmal Sitharaman told reporters after the meeting. ''They raised concerns on FTAs. We will look into the surge in imports and take measures to raise the competitiveness of the local industry.''
On greater liberalisation of FDI in retail, trade body Ficci said, ''Taking into account the sensitivities regarding 'protecting kiranas', the government could consider allowing 100 per cent FDI in multi-brand retail in non-food segment such as electronics and apparel. In food space, there is scope to allow 100 per cent FDI in fresh food product retail.''
Though the BJP-led NDA government has not scrapped the previous UPA government-approved policy on FDI in retail, which allowed 51 per cent FDI in multi-brand and 100 per cent in single brand, it has so far discouraged any investment in multi-brand retail to protect the interests of traders, who represent a major vote bank for the BJP.
Ficci also sought clarity on FDI norms in ecommerce by pointing out that though 51 per cent FDI is permitted in multi-brand retail, FDI is prohibited in business-to-consumer (B2C or retail) ecommerce. It added that FDI should be allowed in B2C ecommerce in a phased manner and there could be a requirement to source significantly from within India to promote 'Make in India' and focus on preferable sourcing of certain percentage from SMEs and MSMEs.
On the education sector, it said 100 per cent FDI should be allowed in all service companies ancillary to education - including construction of student housing, faculty housing, sports facilities, auditoriums and related facilities.
On the insurance sector, FICCI said though the government enhanced the FDI limit from 26 per cent to 49 per cent, the provision mandating that management and control should be in Indian hands is restrictive and therefore should be done away with.
Naushad Forbes, president designate, CII said, ''We should move in the direction where there is only a small negative list of sectors and for everything else FDI should be up to 100 per cent.''
Alleging ''slow progress'' in the implementation of National Investment & Manufacturing Zones (NIMZs), Ficci said it was important to promote the upgradation of existing industrial clusters into these zones. It also said the policy of petroleum, chemicals and petrochemicals investment region (PCPIR) was lying in abeyance due to absence of anchor units, adding that the PCPIR policy needs modification.
To boost exports, focus should be given to project exports, Ficci said, adding that in this regard the government needs to tweak the National Export Insurance Account scheme to give coverage to private sector projects.
The government also needs to ensure that national standards are bench-marked to the world standards in each of the 25 sectors identified for Make in India initiative, it suggested, adding that in some cases there could be a need for mandatory standards too.
Ficci said there was a need to review India's existing FTAs before signing new ones, adding that the taskforce set-up to look into the impact of FTAs should consider the industry views.
Ajay Shriram, past president, CII said, ''Existing FTAs should be reviewed and measures should be taken to ensure that cheap imports do not kill the existing domestic industry.''
Referring to the fall in exports both due to the lack of global demand and fierce competition, Shriram said to boost exports, the government focus on Special Economic Zones and do away with the levy of minimum alternate tax and dividend distribution tax on these enclaves that are fully export-oriented.
Sunil Munjal, past president, CII, said startup should be defined as any business within the first three years of its existence, employing 50 people or less, and having a revenue of Rs5 crore or less. He added that such startups should be given the benefits of simpler labour laws and lower tax rates.
Startups promoting technology upgradation, skill development, and women's or rural entrepreneurship should be given additional incentives, grants and soft loans, he said.
Though the government enhanced the FDI limit from 26 % to 49 % in the insurance sector, the provision mandating that management and control should be in Indian hands is restrictive and therefore should be done away with.