FM warns against global trend of protectionism
Finance Minister Arun Jaitley on Friday sounded a note of caution on protectionism, saying the world should debate whether it would make the global economy more efficient or sluggish.
The minister, however, took comfort from the fact that voices of protectionism are not heard in India.
"...You suddenly found a contrarian trend now moving in the developed economies itself. The reasons would be different in each economy and the trend really is can we reverse this whole process. And that's a little worry which does exist," Jaitley said while referring to the growing voices of protectionism especially in the United States. Increasing protectionism in the US like tightening of visa regime and insistence on using American products may adversely impact global trade and investments.
"In the US, a question has already arisen that whether US corporations would be compelled to buy products, which are costlier. Whether they would be compelled to hire professionals or engage services which are relatively costlier.
"What would then be the plight of the economy? will it be more efficient or will it be more sluggish? I am sure that this debate will continue in each of the countries where debate on protectionism has begun," he said at the CII annual session here.
Referring to the developments in the United Kingdom, he said the British leadership is insisting that Brexit should not be construed as any form of protectionism and instead they want to engage more with European Union as well as India.
India, he said, over the last few years have shown a greater ability to reform and undertook courageous and structural reform.
"We have benefited both from domestic liberalisation and also where we integrated ourselves. Our ability to provide services is certainly unquestioned, it is certainly better than most other economies. Can we improve our ability on manufacturing, that is where we have a lot of distance to cover," he said.
'Abolition of FIPB is now in final stages'
Abolition of the 25-year-old Foreign Investment Promotion Board (FIPB) is in the final lap and this will set the stage for more reforms in the FDI policy, Finance Minister Arun Jaitley said on Friday.
He also said some "tough steps" are required so that India increasingly becomes a tax-compliant society. Jaitley had in his Budget for 2017-18 proposed abolition of FIPB -- an inter-ministerial body under the Finance Ministry's Department of Economic Affairs that processes FDI proposals and makes recommendations for government approval.
"I am now in the final stages of doing away with the FIPB because 90 per cent of the investment in India comes under the automatic route. So for the balance 10 per cent, do we need multiple forums to give approval or (do) we need just one forum in one ministry?" he said, addressing CII's annual meeting here.
The government is yet to announce the modalities of the new system of processing applications which fall under the approval route. FIPB was initially constituted under the Prime Minister's Office in the wake of economic liberalisation in the early 1990s. With FDI investment already liberalised and rules simplified significantly, abolishing FIPB will help streamline the process for foreign investment in India.