Diane Farrell, president of the United States India Business Council says Prime Minister Modi is striking the right notes ahead of his US visit. But also had a word of caution speaking to Shereen Bhan in New York, she said the lack of tax reforms from the government and a rigid land acquisition law remain big hurdles to investment.
Below is the verbatim transcript of Diane Farrell's interview with CNBC-TV18's Shereen Bhan. For the complete interview watch the accompanying videos.
Q: The Prime Minister once again today is stressing on being able to improve the ease of doing business and emphasizing that. Is that the big challenge and the big concern or are they hung up on things like FDI and raising the FDI limits or letting insurance go through or multi-brand retail go through is that now been pushed back to the back burner as long as the government delivers on the ease of doing business promise?
A: There is a difference between a goal and an actual strategy and achieving the goal itself. Insurance FDI stands as a bellwether because it is an opportunity that India has yet not been enacted upon. We are encouraged about the Winter Session and the commentary that we are hearing from the current leadership. However it is the larger issues when you say ease of doing business, it is addressing some of these systemic challenges for example tax, another would be the complexity of permitting, of land use, the kind of barriers that can be very challenging for companies when they are looking to set up manufacturing plants for example.
Q: Are companies willing to be patient? The Prime Minister is talking about India's manufacturing dream, land acquisition is a huge challenge. This government said that they would try and move amendments to the Land Acquisition Act but like insurance which is stuck in parliament we don't know whether all of that is going to translate into reality. So, do investors have patience or do they still want to wait for a while to really understand whether the policy uncertainty and how it plays out before they pump in more money into India?
A: I do think investors naturally are going to hedge. They are playing with someone else's money as it were and so they are going to be understandably cautious. However investors will also look at companies like Ford, Abbott, all of whom are setting up manufacturing facilities in India, who have made additional commitments where there is good cooperation at the state level and that is an important point that you raised especially when you talk about land acquisition. Land acquisition really can't be dictated from Delhi.
Land acquisition is taking place at the individual state level and it has been very heartening to see chief ministers actually speaking out about the difficulties of land acquisition bill that was passed little over a year ago and looking to the centre to make the kinds of modifications and or perhaps taking a more independent interpretation of a law coming out of Delhi in order to adapt appropriately to what their state needs.
This is again where investors still want to see more proof. Let us remember this has only been a 100 days administration. They have got another 4 plus years to go. So, investors are pleased to hear what they are hearing. They need to see more proof that the reforms are actually possible.
Here in the United States we have a certain amount of empathy because India works through a democratic system as does the US. So, when you talk about legislative remedies we have only to look inward here in America to understand how complex that can be.
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