The contentious National Board on Investment (NIB) got the Cabinet nod today, albeit in a new avatar-Cabinet Committee on Investment.
With this body, the Cabinet Committee on Infrastructure will be wound up, officials said. The Cabinet Committee on Investment will be chaired by Prime Minister Manmohan Singh, and will fast-track approval to projects of over Rs 1,000 crore, initially infrastructure ones.
The committee assumes importance as India's economic growth slipped sub-six per cent for three quarters in a row till the second quarter of the financial year. Stepping up investment rate assumes importance to make the economy grow faster. The Planning Commission has set a target of 8.2 per cent growth for the economy in the 12th Five-Year Plan (2012-13-2016-17). The first half of the first Plan year yielded just 5.4 per cent growth.
The idea of having a body for giving speedy clearance to infrastructure projects was initially mooted by finance minister P Chidamabram, who suggested the body be called National Investment Board.
The investment rate in the economy has fallen from the peak of 38.1 per cent of gross domestic product in the pre-crisis period of 2007-08 to 34.7 per cent in 2011-12. In the current financial year, the investment rate is projected to grow to 35.3 per cent.
According to official data, about 47 per cent of the 183 central projects, costing over Rs 1,000 crore, were delayed by up to five years, while 37 per cent reported cost overruns by up to 200 per cent as on March 31, 2012.
Economic affairs secretary Arvind Mayaram said that with the setting up of the body, decision making will become more predictable. Time-lines will be drawn up and within that time-frame, ministries will take decisions, he added.
Asked whether this decision and the general economic reform push by the government will help credit rating agencies reverse their warnings to India on downgrading of its ratings to junk, he said the move would give right signals to these agencies as well.
The proposed NIB created discord between the finance ministry and the ministry of environment and forests (MoEF). Earlier, environment minister Jayanthi Natarajan had opposed the proposal, saying NIB would dilute MoEF’s power to address green concerns.
According to sources, the environment ministry is happy now, as the new committee is not an appellate body. It will just help fast-track projects. So, the powers of MoEF would not be curbed. Moreover, the environment minister herself would be a member of the committee.
After the clearance, the minister, however, said she was satisfied with the setting of the committee and assured that “all concerns have been addressed.”
Industry welcomed the decision to set up the investment committee. Rajeev Talwar, executive director of DLF Ltd, said: “A Cabinet Committee on Investment is certainly a good thing for the industry, as it would mean lesser windows for clearances."
Added R V Kanoria, president of the Federation of Indian Chambers of Commerce and Industry: "This will send a strong signal to the investors that the government is willing to assist the industry through reforms and by further improving the business environment."
Adi Godrej, president of the Confederation of Indian Industry, said: "Project implementation is key to revive the economy...this progressive reform measure would vastly improve the sentiments in the economy."
The decision on setting up NIB was deferred by the Cabinet last week, as Prime Minister Singh wanted more inter-ministerial discussions on the proposal.
Natarajan had earlier written to the prime minister opposing any move to bypass the required green clearances for mega projects.
She had said the proposal seemed to have been mooted only for the benefit of large firms and investors, while having no provision for redressing the concerns of the people affected by projects. Rural development minister Jairam Ramesh and tribal affairs minister K C Deo had also objected to NIB.
Those in the know said everyone was taken on board before the Cabinet gave a go-ahead to the proposal.