FDI IN INDIA
Foreign Direct Investment is welcome into any
country – in sectors in which it is needed. Each country has to identify the
sectors in which it needs FDI and aggressively promote and canvass for such FDI
in those sectors.
Developing Countries like India FDI in many critical
sectors. We do make appropriate noises on FDI at times.
But when FDI
comes in – there are huge problems in India for whoever brings in the FDI. This
is inexplicable.
Take the case of
Vodafone. The transaction took place off-shore. The taxation rules do not allow
the taxing of such transactions. The Highest Court of the Land has ruled so –
after examining the issues involved – in great detail.
Then, the
Government goes to the Supreme Court again – with a Review Petition. Now, the
Supreme Court has rejected the Government’s review Petition also – as having NO
MERIT.
But, we do not
stop there. Even while the Review Petition was pending before the Highest
Court, the Budget proposes a review of all such cases of foreign based
transactions - during the last 16 years –
and we RESTATE our Intention (of the Government) in its Decades Old Rules – that we always wanted to TAX such transactions – though there are no such
words in the Tax laws as they exist.
Is this needed at
this time? Has not Vodafone proved extremely beneficial to Indian Telecom –
rising to a close No.2 position and spreading telecom to all nooks and corners
of India.
How much did
India get by way of various taxes on telecom equipment, telecom services etc? The
credit goes to AirTel and Vodafone – mainly – in relentlessly enhancing the
Tele density in India to the levels of the very Advanced countries.
So – is it
worthwhile – to find all possible ways to get over even Supreme Court Verdict
- and tax this transaction, and probably
many such other transactions? Does it not scare away Potential Investors into
India? Trust and friendliness are what attract people into any country.
Even if it was
the REAL INTENT of whosoever made laws 16 years ago – to tax all such
transactions but they failed to put in proper words to that effect – even if
this be so – is it worthwhile taxing all of them NOW? No one can blame the Tax
department from taking a view which enhances TAX REVENUES in a year in which
they are falling short. But, the Government needs to take a more long term view
of the REAL NEEDS of India.
We need to build
TRUST and FRIENDLINESS in the minds of
Foreign Investors and Domestic Investors – to invest aggressively in India.
India will benefit hugely from such a mindset – rather than from extracting a onetime
tax revenue and break that trust and friendliness. That type of decision can
only come from the FM – not from Tax department, which has a vision cut out for
itself.
It is not a
question of one Vodafone. Many cases of FDI get stuck in India for different
reasons. When someone comes with FDI, he doesn’t seem to get the treatment he
deserves. He doesn’t seem to get the treatment our proclamations on FDI seem to
suggest to them.
Whether FDI or
Indian Investment, there must be RED CARPET invitation to the BIG INVESTORS and
Entrepreneurs – for, it is they, who are creating wealth in India, Jobs in
India, GDP in India, per-capita Income in India, Tax Revenues in India, social
services in India, even philanthropy in India – just to mention a few benefits.
Also, most entrepreneurs
are not embroiled in murders, rapes, thefts etc and are usually abiding by all
laws. Most of the entrepreneurs are CLEAN. Many of them are like MODEL
CITIZENS. They need to be encouraged.
India must allow
both local and foreign entrepreneurs some freedom to invest, expand and bring
benefits to India. The Indian laws must be much more enabling than at present.
These initial
investments must not be seen purely from the stand point of some tax revenues.
In fact, they must be specifically exempted from all taxes. Please get the FDI
or IDI in first. The Tax Revenues will flow later automatically, for a long
time to come. All initial investments and investments for expansion must be
freed from all Taxation. These are the monies that ensure the long term health
of India.
We need FDI. We
must be really very, very clear that we need FDI which creates JOBS and INCOMES
in India and enhances Tax revenues on a more permanent basis?
There is a huge
clamour for FDI in Retail. We want to see Walmart in India. Many Political and
media pundits and even some Corporateurs are dishing out arguments – saying that
Walmart and other FDI Retailers – will do this, that etc to our Farmers, to our
consumers etc and create a virtual heaven in India. No one TALKS ABOUT THE
RETAILERS whose livelihoods are likely to go! We cannot be having a policy of
robbing Peter to Pay Paul.
Did the Walmarts and
other Foreign Retail Biggies bring any such great benefits to farmers and
consumers where they are already operating? There is absolutely no proof for
this. Then, why are we hell-bent on taking away the professions of Indian
retailers in very large numbers in this sector. Whether Farmers and consumers
benefit or not – there is not an iota of doubt that small retailers will suffer
badly.
Also, there is no
guarantee that only the likes of Walmart will come with FDI. FDI from not so
friendly countries will probably be the FIRST to set foot in this sector. We
already know that Indian retail market is already swamped by Chinese products –
without any FDI limits. There is real
need to protect local manufacturers against these products. Many news reports
have hinted and highlighted this need.
On the other
hand, there is huge scope for FDI in Defence Production. India has two great
neighbours – whose friendliness towards India is never clear. Each has its
territorial claims also on India. In such a scenario – FDI in advanced Defence
production through Foreign-Indian-Government partnerships is the NEED OF THE
HOUR. In fact it was needed decades ago. India can and must allow equity
participation even up to 49% also - by Advanced Defence equipment producers
from friendly countries like US, UK, Russia etc. Control can however be
retained in Indian Hands.
Sri Pranab Mukherjee’s
Budget of March,2012 – is certainly very Good in many aspects – in the circumstances
in which it is presented – with some of these exceptions. He has proved to be a
master economist, who can steer clear of all bumps and holes in the economy –except
of course, one or two aspects, like the ones highlighted above.
The request from
all is – please let go of this RETROSPECTIVE CHANGES in taxation, which scare
away all FDI. On the other hand, introduce a few changes, which clearly encourage
FDI in Defence, Telecom, Aerospace, even Road Building and so on – and offer MORE
TAX SOPS AND EXEMPTIONS for such investment.
It is certainly
good Business sense that where we don’t have the money or the skill – we get both of them from whosoever
has them. But why will he come unless things here are at least as easy as in
his home country?
Hope, we will see
some welcome moves in this direction – from our Finance Minister, making this
year’s Budget, the best in recent years.
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