BEIJING, China – India wants to attract manufacturing investment following its latest market-opening initiatives, the country’s finance minister said Friday, despite business concerns about access to land, taxes and other issues.
The government of Prime Minister Narendra Modi has opened more industries to foreign ownership and streamlined official procedures, said Finance Minister Arun Jaitley. He was in Beijing for the first meeting of the Chinese-initiated Asian Infrastructure Investment Bank.
Changes announced Monday by Modi’s 2 1/2-year-old government included allowing complete foreign ownership of airlines and military industries. They also eased investment in pharmaceuticals, food and retailing.
“Being a fast-growing economy, I think we are one of the priority options that the world of investors has,” Jaitley said.
India is known for software and other tech industries but has lagged neighbouring China in manufacturing.
Investors see the country as Asia’s next major growth story as China’s explosive expansion of the past decade cools.
Retailers and foreign investors are attracted by India’s economic growth — the highest of any major country last year at 7.4 per cent — but are frustrated by bureaucracy and market barriers.
Modi came to power promising to overhaul the economy.
“Whichever industries have come to India and invested in India have eventually ended up making India a hub for global manufacturing,” Jaitley said.
Industrial investors have long been frustrated by the difficulty of gaining access to land due to requirements that local residents give their approval. Steelmakers Posco and ArcelorMittal have cited land-related delays in scrapping planned projects.
The Modi government failed to reform land acquisition laws last year when its legislation stalled in the upper house of India’s Parliament, where Modi’s Bharatiya Janata Party lacks a majority. The government has told investors it will be left to states to decide how to appropriate land for manufacturing.
“I don’t think land is any longer a problem,” Jaitley said. “Land certainly for industrial projects will be made available.”
Companies also were spooked by the previous Indian government’s decision to present some with retroactive tax bills. Modi’s government said it would not demand similar payments, though the previous bills still are outstanding.
Jaitley said New Delhi is looking to the AIIB as a possible source of financing for a backlog of infrastructure projects. India is the bank’s second-largest shareholder after China.
“One of our great challenges in India is infrastructure creation,” he said.