Saturday, October 8, 2011



What Sectors need FDI? Which FDI?

There is justifiable anxiety in Government and Industrial circles that India is not getting the desired level of Foreign Direct Investment. It is of course necessary that India must make all-out efforts to attract DESIRABLE FORMS of Foreign Direct Investment, from Desirable Sources (or investors) , into desirable avenues.

But, blind rush for FDI is definitely NOT DESIRABLE. But, I am afraid, this is what is happening. Some days ago – sections of press and media in India carried reports that a huge chunk of manufacturing sector in India has come under Chinese investment. It is not clear whether Government is aware of this, and if so, what is its response to this phenomenon.

At least from my view point – this is not a desirable phenomenon. If China were a steadfast friend of India – my views would probably be slightly different. But, unfortunately, China and Pakistan have chosen to adopt consistently belligerent stand against Indian Interests in many areas of our genuine, justified  interests. How we wish that these two neighbours become our great , reliable friends!

Secondly, China is artificially keeping its currency values at levels not justified by its trade balances. Not only the USA, but all countries like India are bound to be hit adversely by such artificial currency values of Chinese Yuan. Thirdly, any country, including India, must make conscious efforts to promote trade and ties with consistent friends. This is in the long term interest of India and its friends both. Fourthly, No country, including India, must ever make any trade Policies which can affect its future economic interests adversely – in case its belligerent trade Partners want to use the trade for stifling India’s interests at some time .

These factors must always be kept in mind when any Government is formulating its economic and other policies. We can’t shy away from such global realities – which can affect Indian Interests adversely some time in Future.

We must view FDI from all these angles. It is not US – but it is China, which is reported (by sections of press and media) to have acquired a large chuck of Indian interests in Manufacturing sector. The press and media need to tell us more on this phenomenon. Government also must tell us –if it is concerned about this, and if so, how it is going to address this concern.

Now – assuming that India opens up its retail sector, single brand or multi-brand – to FDI, can the Government and Indian Industry which is seeking the opening of this FDI, guarantee that it will be the US, European and other friendly countries  which will be Investing in India and not the Pakistanis and Chinese? Certainly, FDI in retail even from friendly countries is not desirable in the retail sector. Retail sector is the one – which is providing the maximum number of opportunities to Indian middle class and even lower class – to invest. FDI will be significantly curtailing these avenues to the middle class and lower classes to come up as entrepreneurs and businessmen.

In fact, we need much more Indian Direct Investment in these sectors than at present. Thanks to the way, politicians, Police and bureaucracy functions at present – it is now very difficult for Indian middle class and lower classes to function as businessmen. Unlawful collections - mamools, vasools and obnoxious practices like that - are the order of the day at many places in India in this sector. The agitation of Anna Hazare and his team is not only directed against big time corruption but this too.

And, we want FDI in this area! We must clean up our act and ensure that Indians come up through this route.
But, FDI from Friendly countries – must be opened up in many areas where it is beneficial for them and for us both.

One such area is Defence preparedness. We must invite Defence Industries in friendly countries to establish advanced Defence Manufacturing Industries in India – exclusively for  Indian requirements (and, if needed,  for their own country’s requirements too).

Looking at what India is doing in this sector, while we do congratulate these efforts, we do begin to feel many times -  are we re-inventing the wheel? Is this what is necessary right now? Is there a better thing that we can do – to meet our defence needs more effectively? I think, instead of importing defence equipment, it is far better in our interests to seek FDI into India in this area – from friendly countries.

Prestigious foreign Universities – can also be directly invited to set up campuses in India for Scientific, medical, technical and Management education. I don’t think our IITs and IIMs will be the worse for it. They will also gain by the competition.

Advanced research in space, seas, geographical, geological and other such scientific studies – require FDI. India will gain immensely from such FDI. Those who talk of FDI in Retail – can invite FDI in Hotel, aerospace and airline Industries specially. India has very little FDI even here.

India must aim to secure at least one Nobel prize in the areas of sciences and Medicine, every alternate year. We must have such ambitious goals.

India must examine why friendly countries are not coming in these areas to India – and make it sufficiently attractive for them to come in.  There may be many such areas where their FDI is mutually beneficial.

But, we must always understand that FDI in Retail – is not in the best long term interests of India - until, India has assured reasonable levels of employment and entrepreneurial avenues for its own citizens. But, that mile Post is still far away to reach.

Dr.Manmohan Singh has always been very pragmatic in his finance policies, and – I do hope, he will address these long term concerns of India.

* * *  E N D  * * *

No comments:

Post a Comment