Economic Highlights
New Delhi, 18 April 2015
Modi’s 3-Nation
Tour
SELLS DREAMS,
STRIKES DEALS
By Shivaji Sarkar
Prime Minister Narendra Modi has rightfully sold dreams to France, Germany
and Canada for bolstering
their economies by ensuring success of “Make in India”. Despite a sagging economy
in Europe, the countries are warming to the
invitation as the Prime Minister rolled out the roadmap for easier, hassle free
investment.
Modi sought to boost trade and promote a “Make in India” campaign that’s aimed at persuading more
companies to establish manufacturing plants in India. “I expect my visit to be helpful in advancing our Make in India
initiative. The free trade agreement (FTA) discussions with European Union are
ongoing,” he said. “No Prime Minister has visited these countries for a long
time”.
The Prime Minister urged business leaders at the Hannover
Messe (fair) to start manufacturing in India, saying his Government was
cutting regulations and reducing red tape to make it easier for companies to work.
It is not a brand but a “movement” for creating stable economic environment
that inspires confidence at home and abroad, he told them.
The visit has opened up new vistas and many
promises. It is remarkable to have even promises from French President Francois
Hollande and German Chancellor Angela Merkel. The French deal for purchase of
parts by Airbus would be a $2 billion gain for India. Merkel is trying to make
free EU-India trade deal a reality.
The $283 million uranium deal with Canada for Indian nuclear plants may look
insignificant to many, but it is remarkable as it ends almost a 40-year ban
that Canada had put on India since the
Pokharan I test in 1974. It shows Canada
is keen on doing business with India.
The uranium supply would help continue the present plants as well as ensure
supplies for the new ones being set up. This is the second major uranium deal
after Modi struck similar deal with Australia.
Merkel and Hollande have problems. Europe is going through a severe recession. The European Central
Bank (ECB) is under pressure from all European governments for easing monetary
policy. Merkel is being seen as the queen, who Europe
expects to lead them to better days and create jobs. So she invites more
investments from even business houses in India. Modi made it no secret when
he implored Germany to
increase investments in India
to balance the Indian gesture.
It is a bit tough deal with Germany. India has 1600 collaborations and
60 joint ventures with German companies. For long Germany also set up tool rooms to
enhance skills of Indian workers. Even the Siemens Technical Institute, which
the Modi visited, has a unit in Bengaluru.
Germany
has collaboration in science and technology though of late it has reduced
funding its DAAD fellowship programmes. Even trade with Germany has
slumped to euro 16 billion from higher figures earlier.
Germany acts slowly when it has to open up
its purse. Baba Kalyani of Bharat Forge aptly sums it up. He says “whatever
private discussions that I have had with a number of my friends in the German
industry, they are impressed, they are motivated. Nobody is going to jump in
and open the floodgates and I don’t think that is desirable. However, I think
everybody is going to start looking at India in a new and a different way.
Everybody is going to start looking at which areas they could invest in whether
it is infrastructure or power. There was a lot of discussion on power and
infrastructure. The Germans very rightly believe that unless you have high
quality and 100 percent power you really can’t develop business. Unless you
have good quality of infrastructure you really can’t make business productive.”
Neither France
is keen. India
may strategically figure to some extent.
For French companies like Areva, India is a good destination to do
business but still they have reservations. Their aim is to maximize profits. So
they may invest in nuclear energy as Europe and even the US has stopped
adding to nuclear power capacity. Apart from being expensive, nuclear energy
radiation and waste management is considered expensive. The market in Europe is closed. Even Europe
has found shutting down plants to be an expensive proposition. Hazardous
radiated waste needs to be securely managed for 10,000 years.
France
also does not want to end its monopoly in strategic technology. So it goes slow
and puts many conditions for the production of 126 Rafale fighter planes. India found
manufacturing of Rafale at HAL, Bengaluru, to be highly expensive at Dassault
Aviation imposed conditions. Rightly the Prime Minister took the initiative to
cancel it and settle for purchase of 36 planes for two Indian Air Force
squadrons. It gives the IAF advantage of having less dependence on a few sets
of planes. Strategically, it suits IAF to have varied technological wonders.
The
Airbus Group pledge to increase sourcing of parts from Indian companies in the
next five years should be considered a $2 billion gain. Airbus is a European
consortium. Hollande could not have taken the decision alone. He must have got
support from other European leaders. The deal speaks volumes. It would boost
jobs in India.
The
deals with France
are all at government to government level. This does away with the procedures
for floating tenders and that had often in the past been a route for employing
unbusiness-like methods. This fulfils Modi’s dream to keep graft under check.
His meeting with the heads of Canadian pension funds and
banks shows the interest of business. Canada
and India
will also implement plans to complete a comprehensive trade deal by September,
2015, Canadian Prime Minister Stephen Harper has stated. Trade between the two
countries remains limited: Canada
exported $3.1-billion in 2014, compared with $19-billion to China.
“Trade negotiations are never easy,” says Harper. “But there
is nothing about India
– particularly given that it is a vibrant democracy – nothing that would
preclude us from being able to ultimately conclude negotiations. But look,
there are many issues to be resolved, and both Prime Minister Modi and I are
determined to move forward.” Canada
and India
are likely to conclude investment protection treaty in the next few months.
In immediate monetary terms the gains are limited. But it
opens up avenues and the three countries are likely to look at India in a new
way. The free trade deal –FTA- with Europe is
not easy. The visit has opened up India’s vision to boost
manufacturing so that new destinations could be conquered. ---INFA
(Copyright,
India News and Feature Alliance)
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