Brussels - 04-12-2003 Organised by Global Organisation of People of Indian Origin (GOPIO - Belgium) In Association with The Embassy of India Brussels

continued from page 2

India has one of the most transparent and liberal FDI regimes among the emerging developing economies. Most of the investments are on the automatic route and most of the restrictions on investment levels have been removed. Licensing in India has been removed from all but six sectors. The Government is determined to remove any remaining roadblocks – real or perceived. Peak customs duty has been brought down to 25% for all products except agro and dairy products. The Government is committed to reduce the tariffs further. In banking, it is now easier for foreign banks to expand their branch network. They can choose to now get incorporated under Indian laws with 100% ownership and be treated on an equal footing with Indian banks.

The Government has been continuously opening up newer sectors to foreign investment, and enhancing FDI limits in others. 100% FDI is allowed in most sectors except telecommunications (49%), insurance (26%), banking (74%), aviation (40%), and small-scale industries (24%). FDI in excess of 24% is permitted in small-scale industry at 50% export obligation. Further reforms are continuously being made. In 2002 the Government opened defence, print media, housing and real estate, mass transportation sectors to the private sector. As a part of further liberalization, the royalty payments are now permitted on all foreign technology agreements on automatic approval without any restriction on the duration of payments. Companies can even issue equity shares against lump-sum fees, royalty & External Commercial Borrowing dues for payment in convertible currency. The Government has recently established Special Economic Zones with the purpose of promoting exports and attracting FDI. These SEZs do not have duty on imports of inputs and they enjoy simplified fiscal and foreign exchange procedures and allow 100% FDI.

The policy-makers have learnt invaluable lessons from early experience with the liberalization process and cases such as that of Enron. In the power sector, for example, earlier focus was on generation but now it includes transmission and distribution sectors. In telecom sector, policy focus was on licensing and regulation. Now all segments of telecom have been deregulated and regulatory roles have been clarified. India is one of the most deregulated telecom markets in the world. Government of India, with a view to provide a pro-active after care service to foreign investors, to facilitate quick translation of FDI approvals into implementation and to sort out operational problems and find solutions, have constituted a FIIA (Foreign Investment Implementation Authority). This FIAA is supported by Fast Track Committees, which review individual projects and suggest simplification of existing procedures. Nodal officers have also been earmarked for follow up of FDI cases in individual states in India. India is in full compliance with its TRIPs obligations and has a very high standard of protection for the intellectual property rights.

Let us look at some of the sectors where EU companies can invest in India.

I would like to offer some figures that may interest those who have to take investment decisions. Infrastructure upgradation in India is likely to cost US$ 347 bn till 2006. The Government is, therefore, focusing on expansion and modernization of infrastructure and has opened this up for private sector participation. To attract investment in the infrastructure sector, Government of India is giving very attractive fiscal incentives by way of tax exemption and reduced import duties. Out of this about 176 billion $ investment is required to double the present power capacity from 1.1 lakh MW to over 2.2 lakh MW, increase telecom capacity from 37 million lines by adding 52 million lines at a cost of over 55 billion dollars, modernize the ports and add 350 MT of capacity to the existing capacity of 280 MT at a cost of 7.3 billion dollars, increase the road length by about 1 lakh KM from the existing 2 lakhs KM at a cost of about 27 billion dollars and improve urban infrastructure at a cost of about 80 billion dollars. The railway sector will need an investment of US$ 22 billion for new coaches, tracks, and communications and safety equipment over the next ten years. Up-gradation and modernization of airports will require US$ 33 billion investment in the next ten years. Very soon, we will have several projects lined up for linking of rivers as the ambitious programme of inter-linking of rivers takes shape.

Government has been consistently divesting its stake in public sector undertakings in the light of the redefinition of its role from being a provider of goods and services to that of a policy-maker and facilitator. Between 1991-2002 the Government has privatized assets worth US$ 6.3 billion. At present the Government is considering disinvestments of the Shipping Corporation of India, State Trading Corporation, Metals and Minerals Trading Corporation, among others. One of the biggest privatization programmes that the Government has initiated is the leasing of international airports at the four metropolitan cities of Delhi, Mumbai, Chennai, and Kolkata. 10th Five Year Plan has fixed the target of realising about Rs.78,000 crores (US$ 17 billion) from disinvestments which constitutes about 11% of the total budgetary support of the Government. This also provides opportunities for investment.

With the emergence of a large industrial production base and a huge manpower and technical reserve, India has reached a stage where it can equally and successfully cooperate with the developed countries in the areas of high technology. Indians have proved this in the areas of information and software technology. Our software industry is the envy of the world. Our space, nuclear science, biotech and other high-tech capabilities are a matter of pride. Many of you may not know that India is the only country besides EU. US and Japan, to have indigenously designed and manufactured a super computer. India can rightfully boast of Param Padma 1 tera-flop high performance scalable computer cluster. Our experts in the software sector have brought the world’s largest concentration of SEI-CMM companies to India. I am proud to say that in India we have 62 SEI/CMM level 5 companies, which is two thirds of total SEI/CMM level 5 companies in the world. EU at best may have only a few of them. We also have over 200 IT companies having ISO-9000 certification. As is often said, we missed the first industrial revolution but we are determined not to miss the digital revolution.