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Trillion travails
New FDI targets look daunting
29/04/2010

The government has released the comprehensive FDI (Foreign Direct Investment) policy document recently. It garnered some attention in the media since this was the first time that such an initiative was completed successfully. This is of prime concern since the concept of globalization has bolstered the influx of FDI in rapidly growing economies like India. Yet, we know where we stand when China gets $90 billion in FDI in 2009 compared to $21 billion for India.

The PM has set a target of increasing the cumulative FDI to $1 trillion by the 12th Five Year plan as against cumulative FDI inflows of $129.5 billion till January 2010. Anand Sharma, Minister of Commerce & Industry assures that “the figure seems very high in context to our current GDP but our GDP will double or increase by two-and-a-half times in coming five to six years and it’s a reality.”

However, there are few points to be kept in mind. For starters, the sole purpose for an MNC to invest in any country is to earn profit. Thus the country has to provide adequate business opportunities and also ensure that the business is cost effective. It has to provide access to solutions to approval and regulatory procedure related queries and also make information related to FDI easily accessible. FDI readiness also hinges heavily on infrastructure constraints. Besides, the personal perception (of India as an FDI destination) in the minds of top management of MNCs is not very positive. Moreover, there is sheer lack of cooperation from state governments with respect to land acquisition or labour laws.

The government has doubled the basic tax-free investment to Rs.12 billion. It has also uniquely created an Invest-India company to help global SMEs by providing a government equity stake if needed. If the government is seriously considering making India – as they say – “the factory of the world for new technology,” for now, India doesn’t even have the National Manufacturing Policy in place. Anand Sharma seems to be very clear that “when wealth is created, it is to be redistributed.” For now, the foremost challenge is that of wealth creation.

By:- Akram Hoque
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