Government is focussed on creation of robust financial network and an ecosystem- based approach for growth : MoS (Finance) Dr. Bhagwat Karad at G-20 Trade and Investment Working Group Meeting in Mumbai
By PIB Mumbai
Mumbai, 29 March 2023
The Union Minister of State for Finance Dr. Bhagwat Karad addressed the inception meeting of the G20 Trade and Investment Working Group in Mumbai today. Addressing the gathering, the Union Minister said that the government of India has made India into country of hope by creating immense opportunities for global trade and commerce. The Minister pointed out that the government has focussed on two key aspects for growth of trade and investment, namely creation of a robust financial network and an ecosystem-based approach in growth.
The Minister informed the G20 meeting that India has seen exponential growth in overall exports and investment. “India’s share in global exports jumped from 0.5 percent in 1990 to 1.7 percent in 2018 to 2.1 percent in 2022. India’s overall exports in April-December 2022 were estimated at $568.57 billion. This was owing to the pro-active and integrated development approach of the Indian government.”
The Minister said that India’s G20 presidency is about setting the tone for encouraging trade and investment in keeping with the principles of broad-based growth. “Many developing countries can benefit from initiatives such as UPI, ODOP and Aspirational District program. Under these programs. Indian states promote trade through indigenous products, other countries may also promote unique products from their country.”
The Minister said that India’s message is to promote “Growth with Identity” so that countries to recognise that they have needs and specialities unique to them. This will help in preventing concentration of credit amongst few and ensuring equitable distribution and promoting opportunities for everyone, said the Minister.
Creation of a robust financial network
The Minister of State for Finance said that the government fostered creation of a robust financial ecosystem with avenues for credit, savings, and investment growth for the public. “The first major step in the direction was enabling access to banking services through opening of bank accounts under the Jan Dhan Yojana. So far, around 47.8 crore accounts have been opened. Further, these banking accounts were linked to transfer of benefits by the government through Direct Benefit Transfer (DBT).” The accounts served as a crucial gateway for access to credit and investment for the citizens, said the Minister.
The Minister informed the G20 meeting that there has been a complete transformation of retail payments in the country through India’s digital payment system i.e., United Payments Interface (UPI). “Unified Payments Interface (UPI) is steadily becoming globally attractive amid measures to enable seamless cross-border transactions. This is lowering cost of fund transfers and remittance payments. UPI recorded over 7.82 billion transactions worth Rs 12.82 trillion in December 2022 – a new record since it was launched in 2016.”
The Minister said that the overall increased deposit growth and active financial ecosystem helped in availability of cheaper capital for companies and start-ups. “Today, the Indian start-up ecosystem is the 3rd largest ecosystem in the world, with 107 Unicorns. “Recently, India has also undertaken efforts to promote the use of the Indian rupee in international trade. The Indian banking regulator has approved domestic and foreign authorised dealer (AD) banks of 18 countries through opening of Special Rupee Vostro Accounts (SRVAs).
The capital markets and investment services industry has grown by leaps and bounds in the last 5 years, especially in the post-pandemic era, informed the Minister. “Retail participation increased with 142 lakh new individual investors joining the stock market. The investors have also stayed invested in the Indian economy over time. In 2022 alone, domestic investors grew by over 32% annually. Majority of this change in the retail investor preference is attributable to factors like increased financial literacy. The low cost of investment and availability of plethora of investment options is a major reason for rise in investment.”
The Minister spoke about the efforts of the government to create a transparent and liberalised FDI (Foreign Direct Investment) policy in India, to further improve the investment climate in the country. “India has emerged as a preferred investment destination with 20-fold increase in FDI inflows in last 20 years. Total FDI inflows in the country from April 2000 – March 2022 were $ 847 bn. This FDI has come from 101 countries and invested across 31 UTs and States and 57 sectors in the country.”
Ecosystem-Based approach to growth
The Minister of State for Finance said that another critical aspect of growth in trade and commerce in India was the adoption of an ecosystem-based approach to growth. “The government focused on all aspects on the value chain from key manufacturer or producer to the end users. The government also launched schemes to incentivise entrepreneurship in India under “Make in India” initiative, with a focus on ensuring “ease of doing business”. The government focused on de-regulation and de-licensing, alongside removal of overlapping and complicated compliances, to foster ease of business. More than 39,000 compliances have been reduced and more than 3,400 legal provisions have been decriminalized. Additionally, a stable and transparent taxation system has been brought in place. For trade facilitation, custom and other indirect tax rates have been rationalised along with simplified compliance and faceless assessment.”
The Minister informed that a National Committee on Trade Facilitation (NCTF) was set up to facilitate both domestic coordination and implementation of the provisions under the Chairmanship of the Cabinet Secretary. “National Trade Facilitation Action Plan (NTFAP) for 2017-2020 containing specific activities to further ease out any gaps to smooth trade has also been put in place. The plan is mapped to the WTO Trade Facilitation Agreement (TFA) articles and aligned to policy objectives on improving the Ease of Doing Business. Through the Production Linked Incentive scheme, the government encouraged manufacturing in India in varied sectors such as pharma, automobile, and white goods. The scheme was launched for 14 key manufacturing sectors involving a total outlay of Rs. 3 trillion.”
The Minister pointed out that the One-District-One-Product (ODOP)initiative is another manifestation of the ‘Make in India’ vision. “There are over 200 product categories of ODOP products on the government e-marketplace portal. Considering the entire industry value chain, the government has focused on the development of small and medium enterprises in the economy. These enterprises are critical considering they contribute over 30% of the country’s GDP and 50% of the national exports employing more than 113 million people.”
To fix liquidity issues faced by MSMEs, the Trade Receivables Discounting System (TReDS) system is a gamechanger which facilitates the discounting of trade receivables of MSMEs from corporate buyers through invoice discounting by multiple financiers, said the Minister. “This has helped have positive impact on trade and employment in the economy. Many MSMEs did not get their payments from a lot of large players. But these large players would get tax benefits for working with MSMEs. So, in this budget, Government decided that large companies claiming such benefits will only get them once they pay MSMEs.”
The Minister said that for overall development of trade and to ensure smooth supply chain management, the government has focused on infrastructure investment under the PPP model. “The government has raised its effective capital expenditure in the current year’s budget to 13.7 lakh crores amounting to 4.5% of GDP from last year’s investment outlay of 10 lakh crores amounting to 3.3% of GDP. Even during the pandemic, the Atmanirbhar package of 20 lakh crores was designed such that it aids domestic demand, incentivises companies to generate jobs and boost production rather than large cash transfers. This has helped India in keeping inflation under control post recovery.”
The Minister informed that the government has focused on integrated development of trade infrastructure in the country. “Infrastructure projects have been designed for complementary development of multi-modal infrastructure such as roads, railways, waterways, airports, ports, mass transport and logistics infrastructure. The National Logistics policy has also been aligned such that logistics cost is reduced from current 13% of GDP to 7.5% making it easier for Indian exports to compete globally.”
The Minister stated that the development of digital infrastructure has been a key factor in enhancing trade and commerce in the country. “Digitalisation measures have also led to broad based development of the citizens through availability of high- speed internet, creation of digital identities, and seamless integrated access to government services. Information and Communication Technology (ICT) which is known for its export-success for India, is increasingly being used to usher broad based developed across sectors such as financial services, education, and healthcare.”
MoS (Finance) also went around the stalls put up by Textiles Ministry, Central Cottage Industries Emporium, Tea Board of India, Spices Board, Coffee Board of India and APEDA which were set-up as an ‘Experience Zone’ for the G-20 TIWG delegates and guests.