By Sonia Mathur
“Doing business in India must be seen as easy, friendly and mutually beneficial,” said P Chidambaram, India’s Finance Minister, as he laid out his 2013/14 budget in the Indian parliament.
The budget comes as India, Asia’s third largest economy, saw its lowest growth for decades. And like a lot of countries across the world, including the UK, India’s credit rating was downgraded.
After the budget announcement, international ratings agencies Standard & Poor’s and Fitch said their sovereign rating on India is unaffected, but warned that policy execution and controlling subsidies would be the key risks to look out for during the year.
But domestic rating agencies, including Icra, Care and India Ratings, were more convinced by Mr Chidambaram’s speech and said the government would meet the targets.
Long behind China, India’s growth has now also fallen below that of Indonesia to 5%. But Mr Chidambaram said he was hopeful India will overtake Indonesia by next year, projecting a growth of over 6 per cent for the year 2013-14.
To make that aspiration a reality, the Finance Minister wants to encourage foreign investment and use that to spur growth in the economy.
And so in his speech Mr Chidambaram hinted at a major change in the way India mines for coal. The coal industry in India, like most of the infrastructure sector, is state controlled. But the Finance Minister hinted it might open its doors to working with private companies.
This is a major break from the way India has traditionally organised its economy, where the infrastructure sector is state owned and controlled while other sectors are open to private interests.
The theory has always been that the state could better ensure equality of infrastructure provision across the country, while private interests may be more profit driven and not generate balanced growth. However, over the years politicians from all parties have made decisions that benefit their own constituencies rather than the country as a whole. The infrastructure sector has become politicised.
This might also offer opportunities for Wales, with its heritage and mining know-how, to share expertise with India, whether through training future miners or being involved with private investment for exploration within the country.
To boost growth, Mr Chidambaram also announced special incentives for investment in oil and gas, as well as plans to develop seven cities along the Delhi-Mumbai trade corridor with Japanese investment.
Mr Chidambaram emphasised the need for foreign investment to boost economic growth in India. “India at the present juncture does not have the choice of welcoming and spurning foreign investment. We need to welcome foreign investment,” he said, pledging to simplify rules for foreign investors who want to enter Indian financial markets.
Of course one part of India’s infrastructure has its own budget. The Indian Railways, one of the world’s single largest employers, has always presented its own budget in parliament to kick off the budgetary carnival.
The organisation is still wholly state owned and run, though some private companies and contractors work alongside the government departments.
Newport-based Cintec Engineering has a contract with the Indian Railways to provide engineering expertise. They work on the many thousands of railway bridges across the country to strengthen them.
As after every budget, the details of policies emerge slowly. But it’s clear that opening the country’s infrastructure to foreign investors is a major change for India’s economic policy.
To end his speech, the 67-year-old Harvard graduate quoted from Tamil classic Thirukural: “Kalangathukanda vinaikkan thulangkathu thookkang kadinthuseyal.”
Mr Chidambaram’s message is simple: “If we make the right decision and choices and follow up with hard work, then the path to success and progress is laid.”