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China example - we need more FDI: Indian Finance Minister

2005-11-28

KANDULA SUBRAMANIAM 
 
 NEW DELHI, NOVEMBER 27: Outlining a host of reform measures needed to sustain and even go beyond the 8 per cent growth rate, Finance Minister P Chidambaram today called for opening the banking and education sectors, encouraging private investments in the agriculture sector and moving to a more liberal foreign direct investment (FDI) regime.

Speaking at the India Economic Summit organised by the Confederation of Indian Industry and the World Economic Forum, Chidambaram drew upon the lessons from China that has achieved 9 per cent growth and said that India "must open the doors for more FDI" and was sure that such steps would "work wonders" as it did in China.
 
"Those who have the will, will find the way... those who don't, will find the wayside," he said.

Later when questioned on the government's stand on FDI in retail, he said that the Commerce ministry "will be able to arrive at a solution that will satisfy all in two to three months time".

In his address, Chidambaram touched upon agriculture, industry as well as the services sector and highlighted what was further needed to shore up the growth rate.

For instance, in the services sector, leaving aside health and primary education where the government was committed to make massive investments, he said that there was need to introduce competition in those sectors which are still closed. Here he higlighted two examples, that of banking and education and wondered why these sectors can't be world class.

He first asked the industry to move to an "innovative society" and urged them to step up investments in their R&D for "product leadership". And on the government's part, he said that the intention should be to "allow more FDI into industry" and thus exploit the comparative advantage. Afterall, "FDI worked wonders in China and can do so in India".

But as compared to China, he said that it was still difficult to attract FDI into India and the government was thus constantly re-examing and rethinking on how to attract large amounts of FDI. In that regard, he said there was a need to "open the doors for more FDI".

Chidambaram, however, admitted that rapid growth in both services and industry was dependent on good infrastructure. "We are conscious of the huge deficit in infrastructure" and highlighed initiatives such as the launch of SPV as steps to bridge this deficit. He again drew upon the Chinese experience and said India lacks the "killer instinct" while China "does it with ruthless efficiency". Delhi's new airport would be ready by 2010 but Beijing, he said, would have its second new airport by 2008.

On agriculture, to counter the vagaries of monsoon, the answer was put large public funds into assured irrigation. And for this, Chidambaram said that the government was committed to restore and repair water bodies in the country and another 25-30 last mile irrigation projects would be completed this fiscal.

But to step up growth in agriculture sector, crucial component for high GDP growth, he said "it is important for corporates to enter agriculture in order to take agriculture growth to over 4 per cent". While maintaing the "sacred" relationship between the tiller and land, he said that corporates "should be allowed" to enter into agriculture in a big way .

With all such steps, even with the current coalition partners, he was "absolutely confident" that India can achieve 7 per cent even above 8 per cent growth.

http://www.indianexpress.com/full_story.php?content_id=82845