FDI: Foreign Deferred Investment

It’s pertinent to avert the on-going crisis rather than disguising the truth and marketing concurrent economy that has no buyer even on discount.

Pompous road shows cannot charm smart global investors, Mr. Chidambaram. Stop running from pillar to post to woo them and openly accept the acerbic truth of Indian Economy’s battered state. Foreign inflows are drying, imports are rising, and Current Account Deficit is widening, to top them all, even Indian Rupee is sinking.  No sane investor would head to India in current circumstances. Wasn’t it enough insulting, Mr. Chidambaram, that two US trade representatives bluntly endorsed negative sentiment about India just a couple of days after your so called road show at US? It should be. It’s pertinent to avert the on-going crisis rather than disguising the truth and marketing concurrent economy that has no buyer even on discount. Foreign Direct Investment is needed. No doubt. But, what is more needed is to generate self-convincing investment sentiment which would naturally draw foreign investment at home. Won’t you agree Mr. Chidambaram?

For reforms on FDI front, you recently constituted a committee under the chairmanship of Economic Affairs Secretary Arvind Mayaram which recommended raising the FDI cap in various sectors such as defense, multi-brand retailing, telecommunications etc in order to spur investment. You are all for this FDI-cap-hike binge but it’s highly unlikely if it would impress investors as it is more profit not more control what they are looking for and current economic situation is not in the position to offer that. Thus, it doesn’t matter whether 51% FDI in multi-brand retail is allowed or 74%, whether 100% FDI is permitted in telecom or less than that, overseas companies won’t consider India as investment destination as long as investment sentiment in the country doesn’t approve.

Did you notice that serious investors are getting repelled from India while, worryingly, corrupt and crooked ones who are approaching it? It’s a further damage to India’s reputation that Foreign Investment Promotion Board (FIPB) rejected three FDI offers as they happened to abuse India’s Double Taxation Avoidance Treaty with Mauritius. Given the brazen internal corruption, perhaps India is globally perceived as a country where malign business practices can be readily sustained. You must change this perception.

No doubt it’s non-transparent, corrupt and poor governance which has created clouds of uncertainty around Indian economy.  That doing white business in India is risky has become a general notion. From 2G scam, coal scam to recent jet-Ethihad deal, no overseas deals are bereft of controversies. Any sincere investor looking forward to setting-up long term business in the country would expect transparent and stable laws but India is a country where policies can anytime be transformed and deals can be withdrawn. Therefore, as long as there is no transparent and expedite governance model to execute foreign deals, India would remain a turn-off investment destination for overseas investors. After all who would want to stuck in arduous mis-management maze such as India has! Right, Mr. Chidambaram?

India is a federal country where consent of state governments is required for any policy to fructify. It is animosity between center and state governments which, many times, leads to hassles in the implementation of any scheme. For instance, 51% FDI in multi-brand retail had been approved long time back in December 12 but no proposal for the same has been filed yet as final decision whether to allow FDI rests with the state governments and most of them are unwilling thus unforthcoming  to welcome foreign retail giants in their particular state. This non-supportive approach of state governments also works as a turn-off for investors. You would certainly second it. Right, Mr. Chidambaram?

You must also know that  Indian rupee’s roller-coaster movement, country’s chronic high inflation and expensive credit due to higher interest rates eat on the real returns on investment. Also their indirect impact causing fluctuation in energy prices, land shortage, skyrocketing land tariff, time-taking approvals at various stages etc are few other infrastructure bottlenecks which dissuade global investors to set-up business in India.

Therefore, being a sensible Finance Minister, you must hit on exactly where the problem lies, which you very well understand but hesitate to accept. Don’t you know that spending on populist schemes like Food Security Bill will only aggravate macroeconomic challenges? Aren’t you aware that it’s cronies and corruption which repels serious foreign investors from India? Also, you very well know that trumpeting false about India as investment destination or your efforts to increase foreign investment limits are meant to come to copper. Seemingly it’s better to accept that India’s internal governance challenges can never be worked upon. Forget about foreign Direct Investment. It’s Foreign Deferred Investment till the time suo-moto rejuvenation of India's macro-economy doesn't take place. That’s what you want to convey, Mr. Chidambaram?