Page 59 - IACC Newsletter March 2013 Issue no. 9

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Responding to questions, the Finance Minister said the growth of Japan is good for India. Chidambaram is currently in
Washington to attend the annual spring meeting of the International Monetary Fund and the World Bank. During his
trip, he also held road shows in Toronto, Boston and New York to attract foreign investors to India.
"Message is that we are committed to key issues like fiscal consolidation, containing inflation, improving the supply side,
project implementation, independent regulators for critical sectors. It is always useful to talk to foreign investors," he
said.
From the CEOs, he said, he heard, slowness of decision making, obstacles to implementing projects, some ambiguity in
tax laws and some ambiguities in policies. "I think, everybody recognizes that India is an attractive market. Everybody
recognizes that India is a market in which you can do business and make reasonable profit," he said.
"There are some drawbacks in our system, which we need to fix," he added. The Finance Minister said the potential
growth rate of the country is eight per cent. He exuded confidence that India would soon achieve its potential growth
rate. Meanwhile, speaking at the at the Peterson Institute, the Finance Minister, said that in the long run it is in the
interest of India to negotiate a FTA with the US.
"In the long run, I believe, it is in the interest of India to negotiate a Free Trade Agreement (FTA) with the US,"
Chidambaram said.
However, Chidambaram observed that for a rule based worldwide multilateral agreement under the auspicious of
the World Trade Organization (WTO), the fact that so many bilateral, and plurilateral agreements are being entered is an
admission of failure that the rules of WTO do not apply to the whole world.
"But absent a WTO regime, I suppose countries would enter into free trade agreements. We have entered into free
trade agreements with a number of countries. I see no reason why we should not enter to one with the US, although I
am not familiar how much progress is being made," he said. Chidambaram said India is reviewing its bilateral investment
treaties.
"We need to modify the (current) investment treaties in such a manner wherein the sovereign is not dragged into a
commercial disputes and a court judgment does not become a subject matter of arbitration," he noted.
"Until we get this right, we have decided not to get into any further bilateral investment treaties," he said. Noting that
the US has completed its review of its bilateral investment protection treaties, he said America has offered to share with
India its material and literature that they have been able to collect as part of the review.
"We will complete our review in the next few months," he said, adding that, once India does that, it will proceed ahead
with the process of signing more investment protection agreements. Responding to concerns of the US industry, the
Finance Minister said India, a country of more than 1.2 billion people, needs to have a good manufacturing base, the
way China has built it.
"Therefore I do not think anything fundamentally wrong in saying that we must have manufacturing in India of those
goods that are bought or consumed in India," Chidambaram said. "All I am saying is over a period of time please
manufacturing in India. We are not a small market. We are 1.2 billion and a growing market," he said. "The main villain
for inflation is the fiscal deficit. When we fix the fiscal deficit, the inflation will come down. The second cause of inflation
is supply demand gap. And the third and the most important is removing the clogs in the distribution channels,"
Chidambaram said.
"I am confident that inflation will come down. Decision making process in India could be quicker. I want the decision
making process to be faster," he added.
Chidambaram, while speaking at the Charlie Rose Show on PBS channel, said that India must position itself as a force for
peace. He said that that India would like to work with Beijing to bring peace in the region and the world. "India must
position itself as a force for peace. We have no extra territorial ambitions. We have no imperial designs. We must
position ourselves as a force for peace and stability in the Asian region. I think we can do that," Chidambaram said.