Prime Minister Narendra Modi was clear on his focus on aiming for the right kind of job growth and based on that then the right quality of life for the citizen during his meeting with the top CEOs on Monday, says Ajay Banga, President & CEO, MasterCard and Chairman, US-India Business Council.
According to Banga, reading between the lines, Modi is trying to say that Rome wasn't built in a day. On issues such as retrospective taxation, the fact that he has given reassurance about the holding back of future such tax action is important, he adds.
"The real thing that he has got to do is restore trust in the way people perceive India as an investor destination. For that you need predictability and consistency of policy," Banga told CNBC-TV18.
Below is the verbatim transcript of Ajay Banga's interview with Shereen Bhan on CNBC-TV18.
Q: You were part of that high powered CEOs meeting with Prime Minister Modi. What were the specific issues the CEOs raised with the Prime Minister?
A: He started off by talking about his clear focus on aiming for the right kind of job growth and based on that then the right quality of life for the citizen. He was very focused on those two things and he had a whole series of thoughts of how he would go about them and most of that came out through a listening and talking process with him. The CEOs essentially listened to him, understood his perspective and then he said tell me what your issues are and that is when we got down to stuff that still hangs out there. Some things like the retrospective taxation and clearing it up, goods and services tax (GST).
Q: Did you get an answer on that because clearly there is disappointment with the fact that this government has not done enough to ally apprehensions. The retrospective tax law stays. We have set up a committee but that perhaps isn't enough is the feedback from investors?
A: Among investors you will find two types. You will find those who understand that nothing happens in a day, Rome was not built in a day and we are in an awkward situation on this taxation. It requires legislative action. You are not going to get that done in the course of a week or two weeks or three months. The fact that he has given reassurance about the holding back of future such tax action is important. What he is going to get to is solving the issues somehow of the tax issues that remain outstanding from prior actions because till you take both of them away you are never going to get everybody to be completely satisfied.
Q: But there is no reassurance on doing away with the law come the next Budget or anytime sooner?
A: No, not at all. There was no timing, there was no reassurance. All he talked about was I am very focused in making sure that you get towards my topic as well; predictability and consistency. The real thing that he has got to do is restore trust in the way people perceive India as an investor destination. For that you need predictability and consistency of policy.
It is not what you decide it is the consistency and the transparency of the decision that enables investors to decide where to put their money and how to invest and he gets that.
Q: So, predictability, policy certainty is right up there on the agenda. What else did investors want from the Prime Minister?
A: There were a lot of discussions around clarity on FDI. So there was gratefulness of railway 100 percent, defense 49 and insurance hopefully.
Q: Happy with 49 for defense or would they like more?
A: We had nobody specifically raise it in the meeting but I have had conversations with US IBC members separately. All of them would have loved to see more because they believe that at a higher level they would be more willing to bring in sophisticated technology for local Indian manufacturers. Having said that the way the policy has been announced it does give you space and that is very cleverly done and it will allow investors to feel comfortable that there is space here.
Now there are other things that we can do on FDI. There is e-commerce, financial sector reform.
Q: Did he say anything on e-commerce because this government has maintained a sort of ambivalent stand as far as e-commerce is concerned but on multi brand retail he has said categorically no?
A: No, he didn't say anything about e-commerce. The whole topic of FDI increase came up but not specifically on one sector. There the big discussion was around getting some clarity around the whole intellectual property space and that came up in the context of pharmaceutical. India has made enormous strides on the intellectual property in software as well as in movies and music. It is in pharma that there has been all this noise in the last period of time. There are two sides to that. There is a side that I believe that India needs medicines at an affordable price for its vast population. It cannot afford medicine at a certain level of price point. The other side of it is if we are going to do R&D and you believe R&D is a key to developing new drugs then you are going to have to find a way to get companies to be able to get compensated adequately for what they putting in.
Q: Do you believe that there is likely to be any convergence on the IPR related issues this time?
A: I don't know about this visit but I would tell you that in every country where this issue comes up with emerging markets most pharma companies are able to find a way to thread the needle and satisfy both. We had a CEO from one of the pharma companies in the room and his attitude was a very constructive one saying you have to understand our problem; we have got to understand yours. But there has got to be a way that we can do this together.
The Prime Minister came across saying, I get it. My interest he said was in ensuring that there is adequate R&D for the kind of drugs that relief all of mankind with new diseases coming out. Look at Ebola. So, if you are going to do those you\'re going to need to compensate these firms and at the same time he wants to make sure that we don't as an ever greening of patterns and he tried to draw the distinction between the two. Obviously, he made no commitments but he was very constructive.
Q: You talked about railways, intellectual property rights (IPR) related issues areas of opportunity did he focus on anything in specific. Smart cities is this government\'s big idea, big projects, digital India is another one of this government\'s big idea, big project. Did he ask for advice, did he encourage participation or either of those?
A: Absolutely, the conversation was happening we were discussing everything from waste to wealth, which is his idea of taking waste to wealth from 500 cities and converting it to the ability to generate power. We talked about coal and solar and wind and the desire to manufacture locally. He talked about 'Make in India' not only in the context of manufacturing locally although that is important but also in the context of clearing the bureaucracy around the enablement of taking a project from conception to reality.
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