NEW DELHI: Two key instruments are required for sustaining growth, namely, investment and knowledge, stated Mr P Chidambaram, Minister of Finance, at a session of the Pravasi Bharatiya Divas 2007. Increased investment from NRIs requires a change in their time horizon with regard to India. However, he told NRIs, “Many of you have knowledge worth far more than material resources." It would be worthwhile to examine setting up an institutional mechanism for attracting ideas and knowledge from NRIs and using these for the benefit of India’s economic development, he said.

The Finance Minister was speaking at a session entitled ‘How To Get $ 1.5 Trillion Of Capital Investment: The Resource Hurdle For development on the last day of the three-day Pravasi Bharatiya Divas organised by the Ministry of Overseas Indian Affairs, Government of the National Capital Territory of Delhi and the Confederation of Indian Industry.

Elaborating on the theme, the Minister said that India’s aim at double digit growth is not impossible, given the growth experience of East Asian economies. While domestic savings, and public and private investments as well as overseas investments will have the major role, Pravasi Bharatiyas also have a part to play in the effort of raising investments. However, currently most deposits by overseas Indians are limited to three years. Just as Indian industry has altered its planning horizon to 10-15 years, NRIs too must invest in India for the long term. The FM stated that new instruments are being designed for this purpose with adequate checks and balances for investor comfort.

Infrastructure in particular needs $ 320 billion of investments, of which $20-25 billion needs to come from overseas, pointed out the Minister. Various ideas are being considered by the government, including using foreign exchange reserves for investment, and establishment of special purpose vehicles. “If NRIs decide to invest in India’s infrastructure, that will give an impetus to our economic growth and sustain it," he stressed.

The instruments used to propel industry and services growth need to be replicated in the agriculture sector for it to grow at the requisite 4%, emphasized the Minister. Terming agriculture as the ‘gravest challenge’, Mr Chidambaram called for using knowledge of new agricultural practices to enhance productivity of the sector. "Believe in India, " he concluded.

Guest of Honour Dato Seri S Samy Vellu, Cabinet Minister of Works, Malaysia and President, Malaysian Indian Congress, said in his address that Malaysia has been participating in the PBD since 2003, and congratulated Minister Vayalar Ravi for the excellent improved arrangements at the conference this year. He stressed that human resources must be converted into human capital.

The Minister stated that Malaysia can play a role in India’s infrastructure requirements. The country has completed 255 projects overseas with 44 more in the pipeline, aggregating $10 billion, and has a quality assessment system for contractors. “We can help Indian contractors upgrade skill levels of workers," he said. He requested the Government of India to consider recognition of foreign bank guarantees to facilitate investments from overseas.

Indian industry is globalising because of the sustained reform process in the country since 1991, said Mr Ratan Tata, Chairman, Investment Commission. India’s infrastructure offers a vast opportunity for investment, he added and called for more investor-friendly policies to enable easier entry of investments. He informed the audience that the Investment Commission has recommended 4-5 thrust areas for investments. Roadblocks to investment in these thrust areas will be removed expeditiously. India offers a vast market of 450-600 million people that NRIs can tap by finding solutions and products for consumers at the base of the pyramid.

Mr Swadesh Chatterjee, CEO of Swadesh chatterjee and Associates, USA, agreed that a new competitive advantage must be created by attracting FDI. Trade would attract investments, and India must open its economy and aggressively promote investments.

Mr O P Bhatt, Chairman, State Bank of India, said that $1.5 trillion is a manageable figure and that funds are not a problem. There must be funding of the gap between the internal rate of return for infrastructure projects and their economic return. He suggested that some of the options that could be considered are monetisation of gold purchases, long term loans from multilateral organizations, and using foreign exchange reserves. He said that the State Bank of India will continue to play a prominent role in addressing NRI requirements.

Dr Ashok Lahiri, Chief Economic Advisor, Government of India, also stressed that the investment target is achievable; however, the requirement of investment could be higher

by $ 0.75 trillion, indicating the dynamism of the Indian economy. The aspirations of the people and the demand of good governance in a vibrant democracy and strong institutional framework will help the objective. He said that NRIs can leverage their knowledge of India and convert remittances into investments.