Island News

‘It’s now up to NZ companies to come forward’

Written By : Dev Nadkarni Indian Weekender in Auckland. The Indian government’s top finance ministry official, finance secretary Ashok Chawla was recently in New Zealand to explore the possibility of
25 Sep 2010 12:00

image Written By : Dev Nadkarni Indian Weekender in Auckland. The Indian government’s top finance ministry official, finance secretary Ashok Chawla was recently in New Zealand to explore the possibility of increased interaction between India and New Zealand.
New Zealand and Australia were part of India’s “look east” policy, which included the ASEAN states extending all the way to the Oceania region. “We are looking at increased engagement in the Asia Pacific region,” Mr Chawla told Indian Weekender in Auckland.
India has progressively liberalised its foreign direct investment policy and was further fine-tuning and calibrating it on an ongoing basis, Mr Chawla said. FDI inflows have been toting up to US$30-35 billion annually.
Indian companies are investing a similar quantum in foreign countries.
Not much in terms of FDI was forthcoming from New Zealand but “We are impressing upon New Zealand for more joint ventures in agriculture, agro- processing, investment in areas where 100 per cent ownership is allowed.
Let’s hope it carries forward,” the finance secretary said.
“Our regulations are open and liberal and we don’t get a sense that there is anything that’s holding this back.
We are also regularly communicating about access to financial systems, permissions and other matters.
Besides, our High Commissioner in Wellington is doing his best. And so is the newly set up Bank of Baroda.”
All systems were now in place and it was up to New Zealand companies to come forward, Mr Chawla said.

Mr Chawla admitted that India’s trade deficit needed to be addressed.
In the case of New Zealand, India exported only half the value of the goods and services that it imported.
While a trade deficit was not necessarily a bad thing, it would be good to have the trade more evenly balanced, particularly in view of the size of the Indian economy in relation to New Zealand’s, he added.
As a result of the global economic crisis, Indian exports flattened while imports increased because of India’s continued growth even during the downturn in the west.
“As the world economy picks up we’ll see a correction in this,” he said.
Replying to a question from Indian Weekender about the growing chasm between imports and exports with China, Mr Chawla said it was a concern.
“Indian companies need to be more competitive – that’s the bottomline. Chinese companies are able to export at much better prices – that’s why we have a deficit.
We need to do more to export higher quantities to China.”
When asked why India was still exporting natural resources to China in raw form rather than value-added products that would yield better realisation, Mr Chawla replied: “These are certain phases in the process of economic development and these issues are being looked at, I can assure you.” (India exports iron ore and imports steel from China).
There was no single “silver bullet” to tackle deficits, Mr Chawla said pointing out the Central Government’s deficit was about 6.2 per cent of the national GDP.

The overall deficit was just under 10 per cent.
The aim is to drive it down to the ideal figure of three per cent, which will take a few years, he said.
“Prior to the economic crisis it was 2.6per cent.
Increased spending during the crisis is what contributed to the deficit.
That is now being rolled back.
That coupled with increased eco-activity should see it go down.”
Mr Chawla said that India had set no timeframes for the full convertibility of the rupee as yet. “There is no roadmap and no timetable.
The recent financial crisis has also made us more cautious. But we will get there at some point,” he said.
With foreign exchange reserves at an impressive US$280 billion, there was no restriction on repatriation of funds but for conforming to tax laws and Reserve Bank of India regulations.
For the same reasons, the government did not see merit in issuing sovereign paper denominated in foreign currency for NRI investors, Mr Chawla said.

Storm in a teacup

An IAS officer of 1973 batch of the Gujarat cadre, Mr Chawla, who has held several senior positions in the Government of India, dismissed recent demonstrations in Mumbai against New Zealand dairy products as a storm in the teacup.
“More was made of it here in New Zealand than in India.”
He added it was a provincial party that staged the protest and that there was no possibility of such action creating “any foul stink” in the ongoing discussions with New Zealand.
“We’ve made the point to New Zealand and it has understood it well.”
Replying to a question on the Vedanta episode where the multibillion-dollar project was red signaled by the courts, Mr Chawla said regulatory approvals had to be obtained before implementation.
Capital markets were booming, he said, and if anything, “it’s a little too much on the higher side,” he said.
“While an active and vibrant stock market is good we must not have bubbles.”
Mr Chawla hoped Bank of Baroda’s New Zealand business could rope in business enough to encourage other Indian banks to follow suit in establishing operations here.
“On BOB’s success will depend the commercial response of other banks.”
The articulate, widely experienced senior official politely refused to hazard a guess on the size of India’s highly speculated parallel economy.
But he said, with rationalised tax rates that were increasingly in line with international best practice, direct tax collection had increased.
He also added that Swiss authorities had tax-sharing agreement providing more specific access for Indian authorities in relation to persons and banks.
“We’ll have to see how well it works with not only the Swiss but also other countries.
It is also part of the greater transparency in transactions that is being pursued by G20 leaders,” he said.
The affable Mr Chawla did not agree with industry captains like Wipro chairman and one of India’s richest men Azim Premji that expenditure on the Commonwealth Games could have been put to better and more productive use.
“The direct expenditure on the Games is not substantial given the size of the country.
Total expenditure like that on the Delhi Metro should not all be laid at the door of the CWG.
Besides, these are events and activities that bring together countries, sportsmen, have a certain significance to the overall profile of the country.
Purely doing cost-benefit analysis in relation to such activity is neither beneficial nor relevant.
There will always be a fringe opinion that will think otherwise.”
With the controversies surrounding the Games that almost threaten their very staging, the numbers sharing Mr Premji’s view must be growing by the minute.

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