Govt keen to encourage NRI investment: Sinha
Finance Minister Yashwant Sinha says the government is keen to encourage non-resident
Indians in the country's development and proposes in this regard to give them dual citizenship. However, there were many legal complications and as a first step, the provision of the PIO (Persons of Indian Origin) cards has been made.
Addressing the Foreign Correspondents Club of South Asia in New Delhi, Sinha said after the May 11 nuclear tests by India, many NRIs had met him and assured him of contributing to the country's progress.
He pointed out that the NRIs have been given the most attractive package ever, and it was his expectation that huge funds will flow from NRI and foreign investor sources.
Sinha, however, clarified that the NRI package was not a result of the economic sanctions. He said the Bharatiya Janata Party government had always been close to the NRIs and was keen to involve them in the country's growth process.
The finance minister said a bill allowing Indian private companies in the insurance sector will be introduced in the winter session of Parliament. "It is difficult for me to say now whether at that stage foreign companies would be allowed in some way or the other," he added.
Earlier, finance ministry officials said both life and general insurance would be opened to the private sector. In the earlier regime, only certain areas of the insurance sector had been opened up, but now the entire insurance sector will be opened up.
Sinha pointed that the increase in Budget allocation for defence was
''very meagre'' and said if the situation warranted, it would be increased
in the course of the year. India's neighbours need not have any fear on this score since in real terms, the increase was very little, he added.
Finance ministry officials had pointed out that as a proportion of GDP, there was no increase in defence expenditure. Sinha said he was likely to be criticised in Parliament for the marginal increase in defence allocation.
The increase in defence allocation of 14 per cent was not because India wanted to weaponise. The increase was against the revised estimates, which show what has already been spent, and was very modest especially when compared to the defence budgets of China or Pakistan. Their expenditure was much more in terms of per cent of GDP.
Sinha said he had not concealed the increased allocation for either atomic energy, space or defence. The increase in defence expenditure was necessary in the interest of the country.
When it was pointed out that the effect of sanctions had not been accounted for in the Budget, the finance minister said he would do so and respond accordingly once the impact was fully known. Only after 12 to 18 months would their impact become clear, he added.
Sinha insisted he was not unduly perturbed by the fact that the capital markets did not respond favourably to the Budgetary proposals. However, once the market realises the strong fundamentals of the economy, it will move up, he assured those present.
The finance minister said the government would not like to see the rupee too volatile, but would only aim to provide strong macro-economic framework and fundamentals.
Sinha said the government was committed to doubling the flow of foreign direct investment in two years. He said his recent trips to the United States and the United Kingdom had helped him understand what prevented greater flows of FDI into India. Foreign investors wanted removal of the "hassle factor," he said. The Budget introduces the role of a monitoring officer and steps to clear proposals within 90 days, he added.
The finance minister said the government has taken a major step by removing delicensing petroleum, coal, and lignite. This, he pointed out, was a major step and except for the sugar industry, the entire industrial sector was now
delicensed.
He declared that the government had offered an attractive package in the infrastructure sector. The Budget aims to increase direct government spending significantly. Secondly, it aims to facilitate private sector investment. "If you look at concessions in the infrastructure sector, then it is an attractive package," he said.
He added that foreign investors and NRIs were expected to enter the infrastructure sector in a big way.
The minister said the East Asian crisis had highlighted the need to put the the banking system on a strong footing. The Budget has taken steps to control non-performing assets and the country's policy was one of caution and transparency relating to short-term debt.
Neither the finance minister nor the officials present could give a figure about the amount of funds that will flow in from NRI sources after the Budget proposals. They said the India Millennium Scheme and the Resurgent India Bonds will channelise NRI funds into India.
The government would learn from its proposal to enhance NRI
individual investment limit from one per cent of companies total
paid up capital to five per cent in the Union Budget and then see
what role NRIs can play, Sinha said.
NRI investment through the automatic foreign direct investment route can go up to 100 per cent, he added.
NRIs must put their money where their mouth is
Budget '98
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