New Delhi: We spoke to several columnists of our portal and also some activists to get their reactions to the NDA government’s decision to enhance the limit of foreign direct investment in various sectors of the economy.
Most have welcomed the announcements; a few are cautiously optimistic and one is cynical about the whole issue of manufacturing by foreigners. What is your take? Please leave a comment beneath the post.
[dropcap]J[/dropcap]ust when even die-hard well-wishers of Prime Minister Narendra Modi had almost begun to lose hope on any drastic reforms from his government, came the Big Bang Monday with a flurry of bold announcements on FDI in defence, aviation, pharmaceutical and other crucial sectors. To say that the government announced these reforms to stave off any fallout of ‘Rexit’ is nothing short of preposterous. However, for all the global investors looking for China+One policy to establish their manufacturing ecosystem, these reforms couldn’t have come at a better time. Having met with various Indian and Global investors regularly, this writer has often witnessed a wholesome enthusiasm and trust in the Modi government. But, after the initial euphoria, the excitement had somewhat begun to wane with a ‘wait and watch’ strategy setting in. India was getting tough challenges from economies like Vietnam, Malaysia and Philippines in this global contest for FDI.
These reforms will reassure the global investors and re-energise the ‘Make In India’ initiative and Digital India programme. For instance, the FDI policy for just the defense sector has the potential to catapult India to the position of a serious contender where it turns into the defence factory of the world, not to mention a huge captive market of Indian defence and homeland security, which is estimated to spend over $310 billion in the next 5 years, out of which about 38% is expected to be CapEx. A 100% FDI norm will not only allow MNCs to get out of the trap of necessity of JV partnerships with Indian corporates (that often used to be crony capitalists close to the government of the day for “ease of doing business”), but will also encourage them to infuse state-of-the-art technology, set up R&D facilities and register IPR in India. — Kapil D Sharma, veteran management technocrat with about two decades of corporate and governance experience in digital economy, consultant to the Government of India on Digital India & Make In India for investment promotion, communication and brand-building
[dropcap]T[/dropcap]he Narendra Modi Government seems to have turned a very important corner in its policy direction and economic planning. The surprise announcement of increased FDI limits in defence, aviation, single-brand retail, pharmaceuticals and broadcast media is to be lauded. While cynics may argue that this was to soften the unceremonious exit of RBI Governor Raghuram Rajan, widely seen as a dismissal, such policy announcements once made are not easily recanted or reversed. The market response has been positive but understandably muted, given the Modi Government’s lagging track record in implementing significant policy changes.
However, I warmly welcome these announcements, especially given that the BJP has taken on the swadeshi lobby in the RSS on both defence and retail. One could argue that this is a symbolic cutting of the umbilical chord for this government. However, speed is of the essence. It is important that the government follows through quickly and exhaustively on these announcements making immediate rule changes, both to institutionalise this policy decision and to nip protests from the leftist and swadeshi lobbies at the earliest. It is my view that changes to FDI rules in retail and to a lesser extent defence will start showing positive results on the ground in a short timeframe. — Supratim Basu, veteran investor and market analyst, based out of Mumbai
[dropcap]T[/dropcap]he decision to open up to greater degree various sectors of the economy is a welcome step. It will ensure availability of better quality products, enhance competition and to that extent, strengthen the domestic industry and help consumers. The fear of being looted by evil foreigners and the socialist control-freak mindset needs to be driven out of the politician-bureaucrat complex. These only highlight the old establishment’s unease with operating in a rule-based regime. — Chandrachur Ghose
[dropcap]D[/dropcap]etractors call it Prime Minister Narendra Modi’s way of managing Rajan’s exit, but those who had been eagerly pleading for changes in FDI rules will not join that chorus. The largest global brand Apple, for instance. A curious rule in India prevented the big brands in opening company-owned stores unless they met the restrictive domestic sourcing norm — a stipulation of sourcing 30% of products or spares from India. Brands are allowed to sell through franchisees without any restriction, but they can’t set up their own shops! If the government has eased this clause, it falls within the realms of rationality, not Rajan exit.
Most large ticket FDI rule reforms fall in that category. Take the ease of rules in civil aviation, defence, pharmaceutical, food processing to mention a few — all are aimed at creating a conducive investment climate. Such well-planned policy decisions could not have been taken just to shift attention from the departure of a central bank governor who, in any case, is completing his tenure in a couple of months.
If we cannot give credit for something, we must at least not belittle a right move that will be beneficial for the economy and people in the long run. — Sugato Hazra
[dropcap]I[/dropcap]n the era of globalization, it is very difficult for any country to keep its economy closed. So, in line with that, the recent decision of the Modi government to open up various sectors and allowing FDI to come in, even up to 100% in some sectors, is a welcome decision that will go a long way in transforming the country. It will also help in creating more jobs in the country because the money invested by big and small corporates will ultimately expand the Indian economy. It will also help India in capitalizing on the good relationship we have with many countries at the international level. Modi’s extensive foreign tours has helped India build good relations with many countries, but ultimately it’s the economy that drives the relation. Many countries are exploring the possibility of investing here so as to reap the benefits of India’s big market and demography. FDI liberalization will help India bring in investment from various countries with whom we are building good relations. The emerging economic bonding with those nations will further strengthen our ties. We should welcome the decision because, overall, it will help in job creation, improving the infrastructure wherever required and bringing in state-of-the-art technologies as India is a place where labour is cheaper as compared to other countries while we still maintain a high standard of quality as mandated by international licences unlike some Asian competitors where labour may be cheap, but where they compromise on quality. — Siddharth Singh, MPhil student at the Indo-Pacific Studies of Jawaharlal Nehru University
[dropcap]T[/dropcap]he easing of government norms in investment in the domestic sector is a welcome step. It is a double-edged sword, though, and we hope that the government is careful how it navigates through the next few months. Giving wider access to foreign companies brings 2 key benefits: Newer technologies help mature manufacturing in India and improve the overall skill levels in the industry. Second, businesses with access to existing markets will flock to India to gain an advantage in those markets via lower costs here.
The biggest risk (and perhaps the single biggest reason behind Rajan’s departure) is that Indian businesses might get wiped out if they continue to try and compete while using expensive capital. The former without the latter would spell doom for domestic companies. Now they await the cost of capital to be lowered under a new RBI regime, which Rajan would not have allowed.
The hospitality sector is the one which reaps the benefits right towards the end of a development run. They sell their products to the nouveau riche and depend on good infrastructure (transport, food processing, electricity) to deliver it. Keep eyes on this sector to assess for yourself whether ‘achchhe din‘ are indeed coming. — Abhimanyu Singh Rana, IIT-trained biotechnologist, entrepreneur in hospitality industry and owner of a tech start-up
[dropcap]D[/dropcap]uring NDA 1, there were strong protests, dharna and pradharshan by the Swadeshi Jagran Manch against Atal Bihari Vajpayee for the proposed FDI in retail market. Now there is a hailstorm of FDIs in civil aviation, food processing, pharmaceutical, etc where India needs some improvement. This will surely generate employment and also save perishable agricultural products from waste.
However, opening of FDI doors, that too 100% in defence production, has raised many eyebrows. Is the government succumbing to the pressure of weapon production lobby of the US and Israel? Will it not compromise with India’s defence secrets as it will allow many players to come to India in the name of manufacturing, then hobnobbing with the defence personnel. — VVSN Rao, former Director, Sports Authority of India, former consultant, Ministry of Youth Affairs & Sports and OSD to President, All India Council of Sports; former in-charge of Sansad Adarsh Gram Yojana for a remote village in Assam adopted by the then MP and now Chief Minister Sarbananda Sonowal