Dinesh Kamath's Editorial 'It is high time Indian government opened doors to FDI' that was published in Newsband

It is high time Indian government opened doors to FDI

India is acknowledged as the fastest growing large economy in the world. The time is ripe for the country to open its doors wider to Foreign Direct Investment (FDI). At a time when the private sector has a limited appetite to invest and when the government is tied down by fiscal constraints, India needs to seek out foreign capital to keep its growth engines purring. That foreign investors are interested in India is evident.

The three main points are: One, foreign investors, like domestic ones, are ROI (Return on Investment) focussed. Two, even if the Centre is willing to reduce initial entry barriers, frequent market or pricing interventions can deter investors.  Three, the experience with sectors such as insurance suggests that foreign investors committing long-term capital expect to exercise control over the entities they fund.

The decision to ease norms and allowing 100% FDI is both valid and justified considering present situation when country needs investments from various resources. Since the PPI (Public private investment) from country itself is dwindling the government should look for other sources of investment. When UPA government announced easing norms on FDI in 2012, the main reason for capping it up to 49% was to ensure less influence from the investors. However now the government should be careful when approving investment of more the 49%.

FDI reforms may be mainly directed for more business ventures to create job opportunities as India do have skilled man power with qualified technocrats to grab it with both hands. When IT sector was opened up our country took the opportunity with glee – this cannot be forgotten. However the major plus point is that the present government is corruption free at top level was echoed loudly by business magnets and this will lead to good augury. Hope for the best.

Most of the times we are stuck in deciding the right policy by trying to predict all kinds of outcomes. Instead if we act early and open markets then we can calibrate it later. See how US allows highly trained professionals using H1 Visa. India is a market driven economy, whether foreigner is the first investor or Indian is the first investor, it is a matter of time for both to square up. Once market is there it is a matter of time manufacturing moves. There will also be domestic competition as eco-system develops. This has happened in Automobiles, Mobile Phones and Software. If you consider civil aviation sector, big challenge lies ahead

India now NEEDS BRAIN POWER combined with Local resources that would generate Jobs to the 400 million underemployed Human resource. Big investments in infrastructure, airways, railways, and roads are needed to maintain country's growth. As expected, when all doors are closed, the government decided to turn to foreign investors to maintain the momentum.

The foreign investors have much more capital, expertise and experience in taking up these big ticket investments. There is going to be glut of investors in some sectors, especially the ones in which profits can be realized in quickly. The govt has its task cut out. It should carefully choose an investor who can give the best possible service without jacking up the price.