India may relax norms to attract Japanese capital in DMIC

 New Delhi: India is likely to relax guidelines to encourage Japanese funds to invest in the ambitious USD 100-billion Delhi-Mumbai Industrial Corridor (DMIC) project.

The Department of Industrial Policy and Promotion (DIPP) has held a series of consultations with RBI officials on issues like allowing more Japanese Bank branches in India and permitting interest rate and currency swaps, an official said.

The official said the interest rate swap would help in raising long-term capital from Japan.

"The RBI has more or less agreed with all the key proposals of the the DIPP," the official added.

The department, under the Commerce and Industry Ministry, has also proposed some relaxations under the priority sector lending for investment in infrastructure projects.

The DMIC project is important as it would help in boosting investment in infrastructure sector and would also encourage overall economic growth of the country which has slipped to a nine-year low of 6.5 percent in 2011-12.

The project, which was conceptualised in 2006, is being developed in collaboration with Japan as a manufacturing and trading hub, though Japanese participation did not involve equity holding till now.

The Ministry has already circulated a cabinet note to give 26 percent stake to the Japanese government in DMIC Development Corporation (DMICDC). Several ministries, including Finance Ministry, have given green signal to this proposal.

The DMICDC is a special purpose vehicle for the implementation of the project. It will run the trust fund into which the government, multilateral agencies and Japanese entities will invest to finance the project.

The manufacturing sector, which constitutes over 75 percent of the index of IIP, grew barely 2.5 percent in May, as against 6.3 percent in May, 2011.

The Corporation will develop industrial enclaves along the Delhi-Mumbai rail corridor encompassing seven states - Delhi, Uttar Pradesh, Haryana, Rajasthan, Gujarat, Maharashtra and Madhya Pradesh.

The Cabinet had approved equity restructuring of DMICDC and an expenditure of Rs 18,500 crore on development of infrastructure in September, 2011.

The project aims to create globally competitive environment and latest infrastructure to activate local commerce, enhance foreign investment, create employment opportunities, enhance exports and attain sustainable development.