Investor confidence in India on rise; interest in renewable energy high: Sitharaman

All this led to healthy competition between states for attracting investments which in turn led to investor interest in India, she said. Now, there is a lot of investor confidence in India.

Prime Minister Modi’s emphasis on electric vehicles and renewable energy has also attracted investor interest into these sectors, said Sitaraman, adding that India is placing a lot of emphasis on Lithium Ion Batteries.

On job creation front, she said PM Modi has repeatedly demanded that every Cabinet note that is sent of approval has to have a paragraph on job creation.

Below is the verbatim transcript of the interview.

Q: Let us start this discussion by talking about Make in India, one of the most successful campaigns that this government has launched. Two and a half years back, 25 sectors were identified for Make in India. What is the way forward for this very high profile campaign and will there be any scope or proposal to review this very important campaign that this government has launched in September, 2014?

A: You are right in saying it is a big initiative of the government. The Prime Minister launched it in September, 2014 and subsequent to it, we started opening up foreign direct investors (FDI) or investments even by private Indian citizens in some sectors which were hitherto never available for investment by non-government individuals, be it Indian or a person from abroad.

So, an opening up has happened. As a consequence we had to make India a better investable place and ease of doing business was taken up as a result. We engaged with the state government. Now you find a healthy competition among states who are now seeing opportunities for better investment and better sectoral development in manufacturing, if only their legislations and regulations are simplified.

Q: when you talk about ease of doing business, states competing to get their fair share of investments. Now, if you look at the past three years' data, we have seen FDI actually doubling from end of FY14 till now. But are you satisfied with the spread of these FDIs that have come in because if you look at the data and segregate it, it seems that the services sector has got a fair share and some economists point out that perhaps, some core manufacturing sectors and micro, small and medium enterprises (MSME), FDI has bypassed those. So how would you comment on that and do you think there is a course correction needed as far as Make in India is concerned?

A: When investments come in, they are commercial decisions. Opportunities and commercial potential is assessed by the investor himself. To start with, if it is going towards some of these sectors, gradually, with other sectors also revealing their potential, I see that it is possible for investment to go in also into those sectors.

But equally, I must say, the sectors where India has great capacity in terms of human power, in a sense soft power, in terms of the skilled manpower which is available here, the cost to the manpower as contrasted with the Chinese experience, where labour is becoming a bit more expensive. So, investors do prefer a nation like India where trained manpower is available and in cost, if it is better, why not here? That is the second.

And third, a lot of compatibility in investment is also taking place where a manufacturer or a particular item comes, industries which have a linkage to that sector, also draws attention and therefore investments do come in. With the Prime Minister giving emphasis on electric vehicles, today I find a lot of interest in investing in manufacturing of electric buses.

Q: Some Japanese companies, I believe.

A: Toyota and many others have been talking. When I was recently in Japan, I was happy to receive and meet with the company and bosses of Suzuki and also Toyota, all of whom announced, at that time when I was there that they were looking at working together in manufacturing electrical vehicles. Together with that, India is also placing a lot of emphasis on lithium-ion batteries which is essentially required for manufacturing electrical vehicles.

Q: One of the promises that this government has made before coming to power was on the jobs front. Now, while we have seen a tremendous increase in FDI inflows, perhaps the traction on new jobs creation is not that much. Data shows for example that between April and December last year, just about two lakh new jobs were created in each sector. Now, NITI Aayog on the other hand, believes that it is the responsibility of the private sector to create jobs. Government can only facilitate job creation. Being a minister in charge of industry, how would you respond to this issue of job creation?

A: Job creation is a very important issue and I would first of all, put on record here that Prime Minister has repeatedly in every cabinet meeting, had demanded that for every note which comes to the cabinet for approval, he would say do you have at least a paragraph there to tell me what implication it is going to have on job creation.

Besides that, I in fact, very recently told the Secretary of Industries, Department of Industrial Policy and Promotion that we shall hold minimum, a day long if not two, meet with the top industries to assess as to how ready they are to take on board industrial revolution 4.0. How much ever we might thing it is a bit distant, it is not happening tomorrow, it is rapidly catching up.

India's Digitising India programme, it is also, if all of us understand industrial revolution 4.0, is going to be a big part of it. Digitising is the big component. And if digitising is happening, actively promoted by the government of India, you are talking of Internet of Things (IoT), you are talking of robotics, you are talking of knowledge based and smart ways of handling industry, I am asking industry as to how prepared are they for this? Industries are going to be called, ministry is going to sit and talk with them about their readiness or lack of it or their part readiness and its implication on employment. Therefore looking at India's skilling programme, looking at India's labour and in all this the SMEs who may or may not move at the same speed as bigger industry, to see how best they are going to be able to accommodate skilled man power. So, this grand picture will have to be arrived at only after all these consultations.

In fact in the coming month, we shall be holding this major meet with industry to talk to them and find out what implication it is having.

Q: Do you then foresee India having its own Industry 4.0 policy just like for example Germany has, is that something which you have factored in?

A: That is exactly what it is. All these exercises are to come out with such a thing so that we know the direction in which we have to move in order to keep our skilled labour finding their own course. Without direction it is not going to be planned and without planning the national GDP and I take you back to one more argument on which again I have instructed the ministry to review the national manufacturing policy of 2011. That is very important because the national manufacturing policy of 2011 had this objective that the contribution of manufacturing sector should be at least 25 percent of our GDP by 2025.

If that is got to be achieved, is that policy of 2011 given the fact that you are going to move on to an industrial revolution 4.0, is that adaptable, is that going to serve our objective or does it need a complete review? Do we need a policy of a different nature? That I have asked them to quickly look at that and review that in the light of 24 percent is going to be arrived at how.

Make in India has made its own ripples and brought in a lot of change in terms of the investment environment - opening up of newer sectors and so on. However that policy with a number of manufacturing zones already identified in the country - National Investment and Manufacturing Zones (NIMZs) as we call them, they are spread here and there a lot of them. I have an issue integrating them to the corridors that we are building - the pentagon like industrial corridor. I have to integrate them, I have also to comply with this grand objective of making sure 25 percent goes into the GDP by 2025 from the manufacturing sector but is that policy relevant for me, is that policy going to give me that sinew to be able to move forward? So, that review is also happening.

Q: Let us talk about foreign direct investment policy now. There have been several reforms that have been carried out. In fact most of the sectors are open now as far as the FDI cap is concerned. So, give us a sense of what will be the thrust and focus of future changes because FDI cap wise most sectors are open. If that is so then what will be the focus of the next reforms that we expect in FDI related policy?

A: In FDI most of the sectors have already been put into automatic route, very few are left behind. For those who are left behind, you also have each of those departments having a regulatory authority. So, because it was announced in the Budget we are looking at reviewing and seeing if there are any more sectors which we have to open up. The fact is that for those few sectors which are left behind there are regulators within their ministry who probably can set the cap or any kind of conditions which they want to set. So, that is where the FIPB also is being looked for winding up.

Q: Let us talk about our trade related issues. Let me start with our services sector. Over the past couple of years we have been seeing a lot of protectionist policies and announcements and if you look at just 2-3 months in this period, we have seen that a country like US announce a 'Hire American, buy American' policy. Australians tightened their visa policies. Even Singapore, with whom we have a free-trade agreement (FTA) tighten visa policy. So, my question is how does India secure its long-term interest when it comes to protecting our interest of engineers and accountants who want to go abroad and work there?

A: That is the challenge, not just with the countries where we have an FTA, because even there, although it is the feature of the FTA, we find that many of the countries have not really kept by the word which is part of the agreement in fulfilling professional movements. So, it has not become a bit of a worry and those issues are now being moved as an agenda for review which is not actually an ideal situation. So, instead of being part of an agreement which gets fulfilled, we find that they are not being fulfilled. On the contrary, they are also becoming agenda for the next review.

So, it is somewhat hurting. It is somewhat disappointing that in spite of the agreements, when it comes to services, we find that countries have raised all kinds of objections which were not perceived during the signing of the agreement per se. So, countries who probably have benefitted by free trade, I grant it that it is a very relative term to what extent it is free. So, countries which have professed free trade, today are the ones who are also talking about increased protectionism. Countries like India, which have always begun from a very low base have been cautious as to how much they can open up.

Today, when we have a strength in the services sector, the benefits of a free trade are not accruing for us and therefore, it is a big challenge. So, it is a question of do you subscribe to free trade? Yes, we do, but each country has its own definition of to what extent is free, free. So, on services it is a challenge in every negotiation.

Q: I have a couple of questions regarding the US. It is our biggest trading partner, a lot of investments come from the US. Now, if you have seen specific comments being made on companies from right at the top level of the US administration, do we then see hardening of stands from both India and US when it comes to India-US trade relations and if push comes to shove, will India be open to taking trade remedial measures if India's interests in their markets get hampered?

A: There are a few things which you have put altogether into one question. A commercial dispute or a commercial questioning of any particular company is something into which I would never enter. It is the commercial contract and if the contract, the terms are not fulfilled, a commercial issue may arise and that could be between the two partners' fault.

But on the issue of free trade related matters or on the issue of trade related matters. On the issue of let us say, visa, even as I would grant it that it is the prerogative of each country to decide on their visa, but when it comes to the question of such categorised silos of visa which are committed by the two countries, the commitment will have to be kept up. And if the commitment is, for some reason being withdrawn, certainly, India will be well within its rights. That is well after talking and using every method to approach and have a negotiation, India will be well within its right to seek remedy through a multilateral institution like the World Trade Organisation (WTO).

Q: My last couple of questions are regarding the export sector. In March, we saw a splendid increase in exports, perhaps, a six and half year increase. And even if FY17, we have seen a positive rise in exports. What is your assessment on exports side given the fact that even WTO has said that 2017-2018 will be better compared to previous years?

A: The performance of the exports which has shown a bright side will be sustained. Indian exports will sustain the improved performance. If anything, they will improve on it. I do not expect a drastic improvement, but it will continue to keep the momentum and I see that exports will steady and pick up.

Q: So, the worst is over?

A: Yes.

Q: The rupee has appreciated by 5-6 percent. Now, you have maintained that perhaps, it is time to look beyond a rupee pegged exports and look at structural reforms to promote exports. Give us a sense of what this means. Do we then see other mechanisms being employed to promote and bring competitiveness to Indian exports?

A: Yes, constantly this comparison is being made between China and India and that comparison is what I would want to use here to say that India has never grown on the strength of its exports alone. Yes, exports have been given a lot of incentive and we want our exporters to perform better, we want more exports, all that said, India, unlike China, did not depend only on its exports to improve its economy or to strengthen its economy. It is a very critical part, yes.

But then, therefore, we should understand the difference between China and India where exports, even if necessary, with the de-valued currency moves forward. Whereas in India, an economy where export is also an important component and in the last few years, our exporters have seen that currency volatility has become the new normal and as a result of which, exporters have constantly struggled to factor that in.

The other side of the story is India has also depended, Indian manufacturers have also depended on the big Indian market itself and for which, a lot handicaps exist. Exporters are affected by that too, the lack of infrastructure, the logistics, the presence of huge handicaps when you are looking at power generation wherein, end of the day, when adequate power is not available, each industry has to set up a captive power plant for which the expense is phenomenal.

So, your exporter ends up having to do a lot of things which are beyond his core activity. So, the lack of infrastructure, lack of fundamentals such as electricity have always been a serious constraint and therefore, I say, the fluctuation of currency has been less of a constraint. The importance for these will have to be understood and therefore, improved upon so that our exporter finds himself much more competitive in the global market.

Q: Do we then foresee if the rupee keeps strengthening, obviously it is a function of our Indian economy, FIEO says that they are saying rupee at 62 level. If that is the case is the government open to giving any relief to exporters?

A: I am not going to guess the number which the rupee will reach. Even as it is because the tide has been so heavy and much against our interest, we have been supporting the exporters with interest subvention because interest rates are also if you compare to the global situation, Indian costs of capital are very high, cost of borrowing is very high. Therefore we have been having a interest subvention scheme. Those are all being reviewed now as part of the foreign trade policy review. Incentives to exporters will definitely be continued because we want our exporters to perform.

Q: Company like Apple - a high profile company wants to come here and manufacture in India but with condition that it needs some duty benefits. My broad question is do you then see logic in giving duty benefits to companies like Apple who wants to manufacture in India? Not only to Apple but to other companies as well so that manufacture of cell phones and high end cell phones and tablets get promoted, is there a case for giving such benefits?

A: At this stage I am not answering in relation to any one particular company. We want India to be a manufacturing hub, we keep that as the guiding principle.