FDI in retail is a ‘young policy’ that needs to be marketed

India needs to look at how the Free Trade Agreements (FTA) were impacting its domestic manufacturing, said Amitabh Kant, Secretary, Department of Industrial Policy & Promotion (DIPP).

“We have to move out of Udyog Bhawan (the building that houses Commerce and Industry Ministry)… it is important to identify the problem areas impacting the domestic manufacturing and progressively work towards creating a strong local industry,” Kant said.

Taking charge at a time when the DIPP is facing hurdles in moving ahead with opening up foreign direct investment (FDI) in various sectors, particularly multi-brand retail, Kant, in an interview with Business Line, shares his views on creating a proper ecosystem to attract investment.

Edited excerpts:

How do we deal with the problems with FDI policy, especially in multi-brand retail where two States have asked for a roll-back?

Such things will keep happening in a big country like ours. But, it is important to have consistency in policies. It is a young policy. You need to market it and interact more with investors, rather than say that some States (Rajasthan and Delhi) have withdrawn it. That would not be the correct approach.

So what is the official view?

Our view has been that once you have entered a policy framework, you can’t opt out. However, we are seeking legal opinion. This policy came in after much debate. You can’t keep changing policies. Investors come in based on this policy and put in their money. Now, if we withdraw it will send out the wrong message.

How about FDI policies in railways, e-commerce, construction and defence?

In all these areas, the decision has to be taken by the new Government. The policies are ready, but the Election Commission has not allowed us to take it to the Cabinet.

Despite policies such as the Special Economic Zone and the New Manufacturing Investment Zones, manufacturing growth continues to be sluggish. What do you think went wrong?

India is going through a phase of de-industrialisation. De-industrialisation is okay for developed countries like the US or UK. But in India, per capita income is still low. Many think we can grow through the services sector. But it is just a myth. Jobs can only be created by labour-intensive manufacturing. Areas such as textiles, food processing and leather need to be boosted.

Just to say that I am going to create an SEZ is not the right solution. The answer lies in creating the right ecosystem, such as right labour laws, large lands, electricity, water, quick approvals and skill development.

How do you plan to create the right ecosystem?

We have to move out of Udyog Bhawan. The answer lies in States. If we get into right partnerships with States, everything else will fall into place. DIPP is examining good practices adopted by various States highlighted in studies done by the World Bank, Planning Commission, KPMG and others.

Based on that, we have identified the States that have implemented the best practices. If all States are able to imbibe what is best in India based on these experiences, that in itself will make a huge difference to the ease of doing business. It will make the investment flow smooth in the country and also attract foreign investment.

What else could be ailing our manufacturing sector?

We are doing an analysis on how much FTAs are impacting Indian manufacturing. We will look at all aspects, including whether FTAs are leading to inverted duty structures that are in turn hitting the domestic industry. We are also carrying out an analysis on the Bilateral Investment Promotion Agreements (BIPA) that we have signed with other countries. It is important to identify the problem areas to help our manufacturing.

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