New Commerce Minister NirmalaSitharaman says no to FDI in MBRT. Indian retailers are in the wait and watch mode as she indicates that foreign players will not be allowed to open mega stores in the country. BJP always had flip flops over FDI.BJP is the first party who had favoured FDI when NDA government was in centre led by AtalBihari Vajpayee. Later, they opposed when Congress came up with the bill to approve FDI.Now, even the new commerce minister seems to be not in favour of it.Sitharamanthinks FDI in multi-brand retail trade (MBRT) will adversely impact the small traders and farmers. The overwhelming majority of people are decidedly against ‘foreign invasion’ in the form of FDI. On one hand, UPA government has used RBI tool to bring balance in rupee value and one day later it has opened doors to FDI. Here the question is that, whether 100 per cent FDI in telecom sector and 49 per cent in defense sector is security proof for nation. Government has failed in reading economic signals in time, that too when it was headed by the world’s greatest economist, Dr.Manmohan Singh. Then the government announcement on FDI cap in defense at 26 per cent, even while stating that higher foreign investment in ‘state-of-the-art’ technology manufacturing will be considered by the Cabinet Committee on Security (CCS) on a case-to-case basis. No doubt, there needs to be clarity on what state-of-the-art means.
The Centre’s decision to increase Foreign Direct Investment (FDI) in crucial sectors is a hindrance to the self-reliance that any gracious government of an independent country should seek. The media tinted FDI in general – as venomous, impulsive and docile to western countries. While it is etched in stone that a country cannot be propelled only with foreign money, the Government should take steps to clear the web it has spun, to lure the cumulative throwaway income of our increasing working populace. Reforms in governance, sprucing up our infrastructure, clearance of stalled projects expeditiously without devouring disadvantaged sections would attract FDI without invitation and pleading. India should not close the doors to foreign investors; this can be one of the sources to get black money of other countries coming back to India. Every time relying on FDI will not solve the crises of this country, mere hiking limits and changing routs is not sufficient to solve today’s economic crisis. We have to make ourselves more business minded. And government should also frame such policies so that people can get a chance to work. Experts have voiced their concern over the government’s move to allow more foreign investment in defense stating that more clarity is needed while allowing higher FDI.
We are independent and smart enough to build our own country. If we allow FDI to implement ready-made solutions, we will never understand how economic crises can be solved in future. After each economic crisis allowing foreigners investment is not a good idea. We will simply become slaves of foreign companies and its imported products. Why can’t we manufacture or produce things in our capacity here? One of the key reasons for allowing FDI by the current government is that we lack in technology and therefore we have to invite foreign companies to come here with their latest technology and money to setup our “supply chain infrastructure”. This excuse is very shameful and an insult to this country. Every year, thousands of students are graduating from ace institutions like IIMs and IITs, but they have no scope in India. Simple electronic gadgets that we use in our day to day life are manufactured in foreign land and imported by India. Indian brains are in demand around the world but what happens when it comes to manufacture in our own country? Where we are lacking? India’s increasing dependence on China and US for electronic gadgets and Gulf countries for oil has led to CAD looming around at such staggering levels. Till date, government has not introduced any palatable policies for infrastructure development which is required by Semiconductor foundries/industry nor have we seen any meaningful work done to increase the use of renewable energy resources so as to reduce dependence on imports. Technology has undergone leaps and bounds but India is still entangled in countless political discussions which hasn’t borne any fruitful result. Why we are importing computers and integrated semiconductor chips made by other countries? Our money outflow and employments are generated in a foreign land. Government should ease the burden of doing legitimate business in India. We have no other option.
The overwhelming majority of our people are decidedly against ‘foreign invasion ‘ in the form of FDI or democratically–elected Government is pushing these measures in utter disregard. On one hand, UPA government has used RBI tool to bring balance in rupee value and one day later, it has opened doors to FDI. Question is that whether 100 per cent FDI in telecom sector and 49 per cent in defense sector is national security proof. Government has failed in reading economic signals on time and correcting them, that too when it is headed by the world greatest economist, Dr. Manmohan Singh. The government announcment on FDI cap in defense at 26 per cent, even while stating that higher foreign investment in ‘state-of-the-art’ technology manufacturing will be considered by the Cabinet Committee on Security (CCS) on a case-to-case basis. There are grey areas. There needs to be clarity on what state-of-the-art means. Who will define what is modern and cutting edge? There is possibility of subjectivity in the policy.
Confederation of Indian Industry (CII) stressed that FDI beyond 26 per cent should be allowed only with adequate checks and balances. It stated that while concepts such as ‘state-of-the-art’ technology would need to be defined, control should be retained with the Indian joint venture partner. No global major who has spent decades in research and billions of dollars to develop core technologies is likely to pass that on to Indian JV partners in return for 26 per cent stake, in a sector where there is no assurance of the next big order. It is true that a portion of current deficit in GOI account is due to import of telecom equipment. As Telecom sector has acheived tremendous growth in past few years and almost all vendor companies which are supplying equipment are foreign. Thus, this accounts to current deficit.
Business friendly models without bribing with good infrastructure need more focus. Mere entry of MNCs and dumping low quality goods won’t work for long. As rightly pointed out, strong manufacturing base is important for economy to grow. We lack competition and that’s why, we need foreign investors. But, merely increasing FDI limit is not going to woo investors. More important is to create investors’ friendly atmosphere and stable policy. Presently, Indian entrepreneurs are investing heavily in foreign soil. Investment outflow is more than inflow. This clearly shows the difficulty in running business in India. Land acquisition and regulatory hurdles results in inordinate delay and may alter the economic viability of the project. For example, the viability of project is based on the present market demand which determines its internal configuration. Delay in execution may require change of the configuration and result in additional investment to cope with changed market dynamics. We need to expedite the clearance process by making a single window clearance involving all related licensing agencies and government departments. This is a step in right direction as it will bring crucial technology and infrastructure into the country and would reduce the dependence on portfolio investors. However, what is beyond comprehension here is why government hasn’t tried to boost export industry in this time of depreciating rupee. Let’s see, BJP’s commerce ministry may get it in right directions by not being harsh on taking decisions just for the sake of opposing it.
