Your Excellency Dr. Angela Merkel!
It is a great pleasure for me to join you in Bengaluru. Welcome to this Indo German Summit. I fondly recall my visit to the city of Hannover and Hannover Messe in April.
15 States, a number of CEOs and hundreds of companies from India, had participated. The exposure to Hannover Messe will go a long way in shaping our vision and strategy of manufacturing. This is particularly important at a time when we are on the path of making India a global manufacturing hub.
Dr. Merkel and Friends!
There is tremendous potential in India-Germany economic collaboration. Germany ranks 7th among foreign investor countries in India. About 600 Indo-German Joint ventures are already operating in India. However, as of now, our economic partnership remains below our full potential. We are particularly keen to develop the sectors where Germany is strong. We are working hard to create conducive conditions for the same.
Friends! At a time of global slowdown, India represents a bright spot for investments. We are fortunate to be sailing in the right direction. The recent data on global economic activity reinforces this assertion. However, we cannot afford to be complacent. We are committed to doing everything possible to convert these analyses into reality.
With a very open and global mindset, we have worked aggressively in the last fifteen months to make India an easy place to do business. We are committed to creating favorable conditions for business and industry because we believe that they are necessary for improving the lives of ordinary citizens in India. A recent study conducted with the help of the World Bank Group has brought out the urgency among our provincial governments on ease of doing business. They are moving hand-in-hand with the federal government in this direction in a true spirit of cooperative and competitive federalism. In fact the provincial governments have now entered into a healthy competition among themselves to ensure that a transparent, predictable and user friendly regulatory mechanism is quickly put in place.
Friends! One of the biggest challenges in India today is to productively employ our youth. For meeting this challenge, we need to provide a huge push to manufacturing which has stagnated at around 16% of the GDP for several decades in India. This percentage must reach around 25 in the short and medium term. With this in view, we have launched the “Make in India” initiative.
To make it a success, apart from vigorous implementation of measures for ease of doing business, we have fast tracked approvals and clearances for industry and infrastructure. Transparent auction and allocation of spectrum and of key natural resources like coal, iron ore and other minerals in the last 15 months have created a level playing field for investors.
We are aware that our domestic financial resources are not sufficient to meet our needs. Therefore, to enhance the flow of foreign investments, we have liberalized the FDI regime allowing 100% FDI in railways and enhancing the FDI limit to 49% in Defence and Insurance. We have also refined our FDI Policy for construction and medical devices. We have rationalized a number of other FDI related policy issues including bringing in the concept of composite sector caps for the FPIs and other investors.
We are keen to build futuristic physical and social infrastructure. Through self-imposed discipline in the management of our financial resources, we have been able to allocate more resources for infrastructure sectors. In addition, we are setting up an India Investment and Infrastructure Fund. We have targeted an annual flow of Rs 20,000 Crore (which is approximately 2.7 billion euros) into this fund from our own resources. We are putting in place a professional team for asset management.
We have also come up with the mechanism of Tax Free Infrastructure Bonds for projects in rail, road and irrigation sectors.
There were a number of regulatory and taxation issues which were adversely impacting on the sentiments of foreign investors. We have taken very decisive steps to remove a number of long pending concerns of investors.
To give you some examples:
• We have expedited regulatory clearances including security and environmental clearance;
• Across the board, we have increased the validity period of Industrial Licences;
• We have de-licenced a number of defence items and liberalised a number of restrictions like end-use certificate
• We have increased the validity period of defence industrial licences up to eighteen years from three years;
• We have clearly articulated that we will not resort to retrospective taxation and reinforced this position by not going for imposition of Minimum Alternate Tax on FPIs;
• We have notified the regulations for the Alternative Investment Funds allowing foreign investments in such funds;
• We have rationalized the capital gains tax regime for Real Estate Investment Trusts • We have modified the Permanent Establishment norms;
• We have also decided to defer the implementation of the General Anti-Avoidance Rules for two years;
• We have introduced the GST Bill in parliament; we are hopeful to roll it out in 2016;
• We are working on a new bankruptcy code; the Company Law Tribunal is soon going to be formed.
We want to make sure that our tax regime is transparent and predictable. We are also keen to see that genuine investors and honest tax payers get quick and fair decisions on tax matters.
As a result of our initiatives, the sentiments for private investment and inflow of foreign investment have turned positive. The growth rate of our GDP is above 7%. FDI inflows have gone up by 40% compared with previous year’s corresponding period.
Many international financial institutions including the World Bank, IMF, OECD and others are predicting even faster growth in the coming years. MOODY’s have upgraded the rating of India as positive.
India has improved its UNCTAD ranking of investment attractiveness. Against 15th so far, now we are at 9th place. India has also jumped 16 places on the World Economic Forum’s global competitive index after five years of decline in the list. Similarly, in a ranking of the top global destinations for greenfield investment in the first half of 2015, India is at number one. Foreign Policy magazine of USA has ranked India as number one FDI destination.
Thus, just in Fifteen Months, we have successfully restored the credibility of India in the eyes of global players.
I have always said that government has no business to do business. Hence, through PPP or otherwise, we are encouraging private investments in areas where earlier only government used to invest. We are also divesting our stake in the public sector enterprises, to instill market discipline.
Friends. I want to assure you that India is committed to protecting Intellectual Property Rights of all innovators and entrepreneurs. We have taken several initiatives for transparency and online processing in IP administration. A comprehensive National IPR policy is being finalized. Last week I myself reviewed the situation. I can say that this will be a progressive, and forward looking policy.
Friends! We want your active involvement in translating our dreams into reality. Our commitment and aggressiveness to achieve the goal in a faster and effective manner offers immense opportunities to German Companies. These opportunities range from building 50 million houses to setting up 100 smart cities; modernization of our railway network and stations to setting up of new railway corridors; generation of 175 GW of renewable energy to construction of transmission and distribution networks, National Highways, bridges, and Metro rails. Such a huge potential for creation and production will not be available in any one country. More importantly, no one place on the earth can offer the potential for consumption on such a massive scale.
We are trying to power this potential through our campaigns like Digital India and Skill India. To tap the energy fully, we have launched the Start up India Campaign.
I thank NASSCOM for becoming our active partner in this journey. Recently, we tried to ignite this energy through an interface of our youth with the eco-system of Silicon Valley. India, in fact, is on the threshold of a big IT revolution. We are at the tipping point where technology is going to be leveraged to meet the aspirations of our 1.25 billion citizens. These initiatives provide additional avenues for investment in modern technology and human resources.
Friends! Ours is a country of the young and it is going to remain so for many more years. There is a huge domestic market in India. Unlike a decade ago, talented young minds in India are no longer looking merely for high paying jobs. Instead, they have now begun taking risks and preferring to become entrepreneurs. We have witnessed exponential growth in the number of start-ups in the recent past. Some of these have begun to challenge established global players.
To conclude, I can assure you that we will be open to welcome your ideas, innovations and enterprises. I had said in Hannover and I am saying it again, that we are also open to carry out necessary corrections in our policies and procedures. I can say that, never before, India was so well prepared to absorb talent, technology and investment from outside.
To our understanding, the necessary conditions to propel the Indian economy to a high growth trajectory do exist today. I am eagerly looking forward to working with you.
While in Bengaluru, I must add that It is the software of India that will move the hardware across the world; It is the talent of India that will master the technology; It is the market of India that will motivate manufacturing.
Therefore, it makes strong business sense to be in India. It makes even better business sense to Make in India.
Thank you very much!