Clarity in FDI norms, control will boost investment: Sharma

Commerce and industry minister Anand Sharma, responsible for pushing through the highest number of policy decisions during the UPA's tenure, says that FDI, along with domestic capital, is essential to boost economic growth.

Also Read: Cabinet eases FDI norms; opens gates to lure investment

In an interview to CNBC-TV18, Sharma adds that the norms for the creation of back-end infrastructure were formulated with the aim to halt the post-harvest loss in perishable items and offer higher remunerative prices to the farmer.

Below is the edited transcript of the interview on CNBC-TV18

Q: After the Cabinet cleared the easing of norms for FDI in multi-brand retail, do you think the reforms are sufficient? Have you addressed all concerns expressed by industry? Do you finally think that FDI will come in a year-and-a-half after it was announced in November 2011?

A: For 10 months, the process was totally stalled thanks to the partisan agenda of the Opposition, primarily the Bharatiya Janata Party (BJP). So, the decision was shelved until another round of discussions and on September 14, 2012 the decision was taken. This is the first time India is opening up to investment in multi-brand retail. The decision was taken after examining models used in countries and the socio-economic realities in India.

We are seeking to open and attract investment at a time when the flow of capital, globally is very weak and have therefore created an ecosystem to encourage, support and welcome foreign direct investments.

However, there are areas which need to be revisited in the policy such as the norms on backend infrastructure. The norms were formed in order to address the post harvest loss in perishables such as fruits, vegetables and grain which is close to 35 percent. The creation of a backend infrastructure will create not only jobs but also offer remunerative prices for the farmers.

Q: Why has the government failed to boost domestic capital or create this backend infrastructure?

A: How can you prevent foreign capital from coming in? Do we need foreign capital or not? As a country which has a total forex reserve of USD 280 billion which is adequate enough to meet its import bill for seven months, are we satisfied? It has to be understood that though domestic capital has been invested into the organised retail sector, has the improvement in the situation been adequate? Global retail majors will bring in technologies that is badly needed.

Q: Though global retail majors have welcomed the government's ease in FDI norms, they still have to meet regulatory guidelines. Is the ease in FDI norms a means to assure the global retail major of being accorded a red carpet treatment?

A: I can say that.

Q: On what basis do you make that statement?

A: Foreign investors will face no regulatory flak thanks to the great degree of clarity in our policy regarding equity structures. In February 2009, the Cabinet Committee on Economic Affairs (CCEA) took a decision on ownership and control based on the recommendations of an empowered group of ministers (EGoM) chaired by P Chidambaram and included AK Antony and I.

Now ownership and control have been defined according to norms of the Securities and Exchange Board of India (Sebi), the Securities Appellate Tribunal and the Companies Bill 2012 which is before Parliament.

Q: Why did it take so long?

A: That's not true. In 2009 also the definition was very clear — majority equity and the power to appoint majority directors. The problem arose due to a gap when the Foreign Exchange Management Act (FEMA) regulations were aligned with it and the notification was issued.

Q: Will the change in the definition of control impact or benefit Bharti Wal-Mart?

A: I am not aware if the issue came before February 2009. But since that month, the policy is clear. What we have brought in power to not only appoint majority of the directors but to take management policy decisions and which is reflected through shareholders agreement and the voting rights.

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