The Hindu : Business : Chidambaram pitches for larger U.S. FDI inflows

Online edition of India's National Newspaper
Saturday, Mar 04, 2006

Business

Business

Chidambaram pitches for larger U.S. FDI inflows

Special Correspondent

Scope for persuading Parliament to raise insurance FDI cap

NEW DELHI: Finance Minister P. Chidambaram on Friday assured CEOs of U.S. companies that the Union Government was committed to further reforms and an easier foreign direct investment (FDI) regime, particularly in insurance and banking.

Mr. Chidambaram, while addressing the CEOs at the inaugural of the CII-US India Business Council conference here, said: "Let me tell you, we want your money. Those who have money have the technology also. I want your technology also. I want your good management policies, good governance norms.''

Noting that India had attracted FDI worth $37 billion thus far and of this, only $5 billion was from the U.S., Mr. Chidambaram said, "both numbers are not impressive,'' especially when such investment inflows were crucial for India to hike the overall investment level to 34-36 per cent of the country's GDP (gross domestic product) so as to attain a higher growth of 8-10 per cent.

Second best destination

Mr. Chidambaram said even if the domestic savings rate was up to 30-31 per cent, India would still require an FDI component equivalent to four per cent of the GDP. In this scenario, there were tremendous opportunities for U.S. companies to invest in the country, he said.

He urged U.S. firms to bring FDI into sectors such as infrastructure, IT hardware, automobiles, especially small cars, the financial sector, leather and textiles as also gems and jewellery.

Mr. Chidambaram, in a hard-sell pitching for larger FDI inflows, cited the AT Kearney report, which ranked India as the second best FDI destination after China and placed the U.S third after India. He conceded that there were some concerns in financial services such as insurance and banking but asserted that the lower FDI limits were not entry barriers. "The 26 per cent cap in insurance is not an entry barrier. The Indian market is still hugely untapped with only 10 per cent of people in the insurance net. There are still many companies which are not present in India and as we go forward we can persuade Parliament to amend the Insurance Act [for increasing the FDI cap],'' he said.

As for the banking sector, Mr. Chidambaram said it was in the first phase of opening up and provided a lot of opportunities and it would be liberalised further after 2009 in the second phase of reforms. Mr. Chidambaram also lauded the India-U.S. CEOs' Forum for identifying some "real areas'' for further mutual business engagement.

PTI reports:

Liberalising insurance

The Chief Economic Advisor to the Government, Ashok Lahiri, said increase in the FDI limit was a solution to the capital requirement in the insurance sector and there should be a debate on a level playing field for Indian and U.S. banks in opening branches in their respective countries.

"There is a need to look at FDI (in insurance) and how to liberalise this,'' the Chief Economic Advisor said at a CII Indo-US Round Table on Financial Sector here.

On Indian banks finding it hard to open branches in the U.S., Dr. Lahiri said private sectors of both countries needed to debate on this.

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