Economic Highlights

New Delhi, 6 December 2013

Tall Claims On FDI

INDIA CAN DO WITHOUT THESE

By Shivaji Sarkar

Finance Minister P Chidambaram is finally no longer in a denial mood. In his own words he has accepted the deceleration in growth. But, sadly he continues to claim that in a restricted global survey corporate executives chose India as the topmost investment destination and Germany as the 15^th destination.

It’s indeed nice to hear from the Finance Minister. But is this the truth? During this period, there has been significant withdrawal of FDI as well by various firms, including Vedanta, Posco, Arcelor Mittal and Berkshire Hathway Inc., reports the Wall Street Journal.

The overall interest in the Indian economy has started languishing. Whatever pride and confidence Chidambaram may have exuded at a recent conference, the views projected by the World Investment Report (WIR) of the UNCTAD negates it. It does not even see India as a separate entity. Much to the chagrin of every Indian, it is clubbed with Pakistan, Sri Lanka and Bangladesh, where the FDI declined significantly.

Statistics reveal that inflows to India, Pakistan and Bangladesh dropped by 29, 36 and 21 per cent, to $26 billion, $847 million and $776 million, respectively. FDI to Bangladesh also decreased, by 13 per cent, to about $1 billion. Nonetheless, our neighbour remained the third largest recipient of FDI in the region, after India and the Islamic Republic of Iran – where FDI increased by 17 per cent, reaching a historical high of $5 billion.

Some Indian companies, especially conglomerates have even pulled back from large foreign merger and acquisition (M&A) deals in recent years, owing partly to financial constraints, the WIR reports. This only means that the small edge some companies such as Tata, Birla and few others were having, is gradually being eroded because of domestic economic conditions. As a result, the total value of cross-border M&As undertaken by Indian companies in 2012 dropped by nearly three-fifths, to about $2.65 billion.

Undeniably, the Indian economy experienced its slowest growth in a decade, and a high inflation rate increased risks for both domestic and foreign investors. As a result, investor confidence has been affected and FDI inflows to India declined significantly, WIR sums up. The facts are corroborated by the Commerce and Industry Ministry. It states that FDI in India fell 21 per cent in the fiscal year that ended March 31, 2013.

That is the reality. Chidambaram shouldn’t have couched facts. The country needs to admit it is not doing well. It also needs to admit that emphasis on the so-called reforms is not attracting investors, whatever the “surveys might bring out”.

Nobody can disagree with Chidambaram, when he says “No government delivers growth. Government only delivers conditions for growth”. The nagging question is whether this is actually happening?

Let us not discuss galloping inflation rocking the purchasing power capacity of an average citizen, falling industrial and manufacturing productions. That is the reality and Chidambaram should refrain from rushing into a political overtone, where on another occasion, he mocked at what BJP Prime Ministerial candidate Narendra Modi said on inflation: “Does he not know that inflation is due to corruption?”

Yes, that is an ominous issue. If corruption is increasing leaps and bounds and engulfing all sectors of the Government and economy, it means the Government is not ensuring conditions for growth. Rather, we have seen at times the nation succumbing to it, be it the lobbying by Wal-Mart, or gas prices of an Indian company, or Radia tapes or so many other favours given to near and dear ones.

Chidambaram’s boast of transparency gets lost in the web of corrupt practices. Today, even a licence for a television channel, worth a few crores, cannot be had without satisfying those in authority. When the Finance Minister talks of corruption, one expects him to speak of these simple facts as well.

Additionally, one cannot possibly agree with Chidambaram when he says: “But I may point out that what this country lacks is vigorous, energetic, intellectual debate among political leaders”. The nation has on number of occasions seen Parliament getting stalled by the Treasury benches itself when leaders from the Opposition and even at times from the ruling combine have raised issues. Even on television debates, the arguments are trashed as the views of a political opponent. The nation wishes the Government takes up the cudgel to come out with the entire truth and not protect the wrongdoers.

The Finance Minister speaks of unnecessary stalling the Insurance Bill. But can anyone say how opening up of the insurance business would help Indians except that large amounts would be repatriated and not a paisa of investment (FDI) would come in. Instead, why doesn’t the Government consider strengthening the Indian public sector insurance companies, known for their integrity and good service, and making these global giants so that these could appropriate a large part of the global business?

Chidambaram must know why Niyamagiri bauxite mine hills could not come up, or why Posco and Vedanta had run away. The Supreme Court stepped in to rescue of the tribals they were being uprooted from Niyamagiri and also devastating a vast natural wealth. The same was the reason for Posco and Vedanta. The same is happening in Rae Bareli in Uttar Pradesh too. The landless have locked up rail coach units and other projects there a number of times.

The image that people have of the Government is that it is acting at the behest of the rich corporate and at the cost of the aam admi and small farmers. Somewhere, the functioning has stark similarities with the indigo planters in eastern India. That approach needs a drastic change.

India has the potential to emerge as the largest economy, and not merely the third largest as the Finance Minister boasts. But it requires a right-thinking, pro-people Government. The people are not at fault nor are the corporate houses but yearning for FDI at any cost is not helping this country. Let the Government go back to its roots and start from scratch to take the country to dizzy heights.

The country has the capacity to grow even without its fixation for exports, as what UNCTAD and some other UN bodies have said. It can grow even if the US and Europe sink. It needs a strategy to delink from global powers and draw its own growth path. If it is having 4.8 per cent growth in the most difficult times, it is because of its innate strength, unaided by any global power. --- INFA

(Copyright, India News and Feature Alliance)