Atanu Dey On India's Development

FDI in Retail is Good for India

| 40 Comments

I have a piece on NitiCentral.com where I argue that FDI in retail is good for India. Naturally, the comments are negative since Indians have the milk of socialistic thinking coursing through their veins. India would not be so poor without that mentality, would it? It’s all karma, neh?

  • Tilopa

    Atanu,

    Even the right wing indians cannot get rid of socialist hangover.

    From much time i have been contemplating about my hindu identity and how should hindus be moderate,progressive so that they can be as forward as europeans and still rooted in their culture.
    But whenever i see hindu gurus and leaders making some crazy and phobia like remarks of anything western then i really have to give a second thought to my ‘hindu identity’.
    For ex: Baba Ramdev in his usual jibes says that “all the MNC’s should be banned and TV should show advertisements only related to agarbattis and ghees” (India today ,in a 2009 edition)

    Then we have other such right wingers who have the mentality of the left like the RSS.
    These guys also consider it a virtue and a god given right to tell us what we should wear.Moral policing is common with many saffron groups.

    Now i think that what is the ‘hindu’ identity worth for if it will lead to another police state with superiors telling us inferiors how e should live life.

    What have you to say on it.Why does the hindu right has become like this and is there a way out?
    Share your views please.

  • Kalpesh

    Atanu,

    Your thoughts on Dr. Swamy’s point on FDI in retail is not a level playing field (i.e foreign retail corp. bring huge money at cheap interest compared to the interest rates in India) is appreciated.

    Thanks!!

  • Jin

    Hi Atanu,

    I guess, little context will help the readers of that post.

    As you did with telecom example, one can add example of how could be how auto-mobiles were first opposed by hand- rickshawwalas. But imagine what would happen without cars and other auto-mobiles.

    Second example, computers were first thought to be evil, that they will take up all jobs of clerks and babus. But this did not happen and the service levels increased.

    One can even show how APMC act is making middlemen rich and keeping farmers poor

  • tp

    Yes, FDI in retail is good. At the very least, the USA press will stop its recent barrage of critical articles about Singh and his political bedfellows, and S&P ratings will shoot up.

    Funny, those Time and WashPost type articles. I mean, India has been wallowing in its fourth-world muck for several decades, under everyone’s watch, and USA has been quite happy with that state of affairs. When they start caring (or appearing to care) that India is badly managed, naturally one questions the intentions.

  • mallikarjuna

    Very timely article.
    Quite helpful.

    my 2 cents.
    1) By using credit card at malls, I find I can buy stuff for Rs 74.99, where as at Kirana/Departmental stores, it’ll get rounded off to Rs 75.

    2) I need to buy, what is available at Kirana/Departmental stores, but at malls, I can quickly compare with choices I have.
    I can compare the rate of Safola masala Oats against Britannia Oats against Quaker Oats, find that Quaker is cheaper & buy it.

    Hope some policy-maker bothers to clarify the advantages & trade-offs in lucid terms….

  • gaurav

    It will surely benefit the consumers – no doubt abt it. It should benefit farmers, but I dont think i would benefit Indian farmers.. majority of farming in India is small scale as opposed to specialized large scale farming where farmers by themselves own big farm lands..These large scale farmlands are utilized by Retailers.. I fear what will happen in India post 51% FDI is such small scale farmers will be devastated as with them the middle supply chain.

    I think it would have been best had India made a educated policy decision which encouraged strong farming co-operative societies composed of small scale farmers roughly on lines of Vibrant Milk cooperatives societies at Gujarat. This would have made India better equipped to handle its own interest in FDI in retail. I aslo question the 51% stake in retail.. why not 30 odd percent which was advocated during NDA time??a

  • gaurav

    Another possible outcome of retail – Take the example of a humble safety pins… this small product is product of cottage industries in India and supports lively hood of LOT of people…Post retail … if we, consumers had an option of a better made safety pins at a cheaper price… wont we buy it? offcourse we will …but irony is that cheaper better safety pins will not be from India….and with time,such cottage industries like – hooks, incense sticks, matchboxes, will slowly but surely be dead.
    I would like to live in a India which is self sufficient, and is not entirely dependent on economy of another country… An alarming statistic – If china for some reason stops its food exports… half of USA will go hungry… Iam not against FDI. but I dont believe anything that comes from CONGRESS…

  • RC

    Professor Saab,
    I am reminded of the Buddhist proverb
    — “When the student is ready, the teacher will appear” —-

    It took India around 30 years and a balance of payment crisis to get rid of (reduce, its still not completely removed) its license-permit-quota-raj since academics wrote papers showing the ills of it.

    I wonder how do people explain the ginourmous amounts of FDI is all kinds of sectors that China allowed in to get to where it is today.

  • http://akshar100.wordpress.com Akshar Prabhu Desai

    Even while one agrees completely with you on your points, there is scope for opposing the government’s move. This government is predatory in nature, it is pure evil and driven by nothing but self interest.

    The newspaper says that government allows FDI in retail. Good I say but what lies in the detail? A. Raja and his cohorts like Kapil Sibbal claimed that they were merely following the previous government’s policy of FCFS. It is only when we looked into the details we got to know that the FCFS was a total farce.

    So when Manmohan Singh’s government says something that is in the interest of people I think all right thinking individuals should pay attention to the details and find out what exactly it means. The bill might have caveats that help ministers earn a commission, create monopolies and other side effects which in the long run might be harmful for the country. Not all criticism may be because of socialist mentality.

  • Loknath

    Tilopa,

    I was struggling with the same dilemma as you do. Viz. the righties behaving worse than lefties. But I was not mixing Hindu Identity here. I believe Hindu identity in this country is a manufactured identity for most part and for most of us. It was easy to do so because the state successfully managed to keep all Hindus malnourished, illiterate, intellectually poor and clueless for over 1000 years and more so in the past 100 years.

    Hindu identity and the idea of self-sufficiency need not be mixed with things as mundane as foreign investment, Wal-Mart and state policy. Hindus were never great consumers and they never will be unless the stuff is given for free. Even then I am uncertain if they will really consume the stuff (as Atanu calls it).

    If the likes of Walmart manage to sell gold and vegetables for a dime cheaper or in exchange for rags and old utensils, everyone will throng the stores from 6 in the morning. This is still the case in America where a discount announcement for a new phone model at some local store makes people fall in queue from as early as 4am. This behavior is also likely in India but this is best explained by taking the Hindu out from the Indian. It is the past deprivation and cumulated insecurity that will make us behave such and will continue to be so till our appetite for all good things in life is met sooner in life. Walmart will have a small role to play towards this end. Hindus may reach satiation a tad sooner and that means living most part of his life as a true sanatan dharmi Hindu. Executives of Walmart sure know more about Hindus than Hindus know about themselves.

    I think the righties were opposing FDI just for the sake of opposing. Perhaps they didn’t like the idea of congis scoring some brownie points when it was actually their time and deservedly so. A case of Good economics, bad politics but we should resist giving credit to Maunmohan Singh once again.

    In fact we should be glad about the fact that we are not the ones spending the monies to build the infrastructure that Wal-Mart needs. They are smart. So they will build it first to gain the competitive edge. Everyone else will benefit from it. Viz. Consumers, suppliers, truckers, warehouses, banks, software companies, exporters and importers.

    What would be interesting to witness is who will be the eventual owners of the capital in FDI (other than the black monies of the like of Antonia Maino and Chiddu). I have a strong intuition that Indian origin retailers by now would have incorporated enough companies in tax havens outside India, all ready to pump low cost capital into their existing retail businesses or maybe they end up creating some complex entities partnering with the likes of Walmart as managing partners, JV partners, equipment manufacturers, technology suppliers, supply scientists, complex trader entities, financers, logistical entities etc., not of which will be purely meant for FDI in “multi brand retail”. There will be investments in other primary sectors too which is a good thing for everybody.

    Atanu: You need to dissect this more. Why couldnt organized retailers in India do what Walmart can, assuming they have access to cheap capital from outside. What stops a reliance retail or a spencers or a big bazar not become tomorrows walmarts

  • DJ

    Gaurav, a) the co-operative societies you talk about can still be created and don’t need government support. b) Self-sufficiency should be a strategic option but not a goal in itself, and the way to do that is to build reserves and have minimum levels of sufficiency. Self-sufficiency sounds great, but right now India has more to gain from the world than vice versa. If we choose to be self-sufficient, we should also kiss foreign products like computers goodbye along with all IT and MNC jobs. Why would you want that? c) The exports of China to US in the food sector is not much. Its actually the opposite, US has a lot of food surplus and they are busy making fuel from corn, and other kinds of stupidity. d) Ultimately, if a safety pin can be made more cheaply elsewhere then we need to buy it from there and have our people do something else that they can do better.

    That runs into the problem of poor human capital quality and that is really the key issue, which would need policy support (education, vocational training, etc). I’m reminded of a paper on the Asian tigers in the mid-90s by Krugman. He analyzed the growth of the Asian tigers and noted that the first wave of growth was easily done by unlocking the unused physical capital in the system (banking, real estate, etc). But, the next wave of growth was hard because it could only happen via productivity gains. In fact, productivity gains are really the only kind of good growth there is.

    Productivity gains means improving labor quality, education and removing inefficiencies and embracing market outcomes. You can well imagine how tough that is to do in a country like India, where people have been entrenched in inefficiency and the same profession for so long. China could do it via dictatorship, India is going to find it way tougher, but its the only way out. No other option.

    And, its actually not that bad. If you think about it, rural India is used to making big sacrifices and changes anyway. They migrate to urban areas and live in slums in search for better jobs. Indians are actually way more resilient and adaptable than we give them credit for, so they will adjust. In fact they are denied the opportunity to adjust, when they want to do so themselves. They do not want your charity and your pity and continued support for a dying business. The problem is with the politicians who will twist the issue to their favor and demonize foreign companies and FDI, etc. So, we will make progress in fits and bursts, but it is inevitable, especially, since we are scraping the bottom and there is no place to go but up, at least in a relative sense.

    Lastly, there is the issue of crony capitalism which will affect foreign companies as much as domestic companies. I hope people will be able to distinguish between responsibilities of companies vs responsibilities of regulators.

  • og

    DJ makes some valuable points, but it may be useful to point out the following potential stumbling blocks:

    “if a safety pin can be made more cheaply elsewhere then we need to buy it from there and have our people do something else that they can do better.” — it’s a trade-off between price (~ wages) and quality. What you probably mean is, if a safety pin of the same cost is better if imported, or a safety pin is cheaper if of the same quality, (only) then we should import. The counter concern is, if you extend beyond safety pins, you will easily go to computer and networking hardware (where we have no capability at all, leave alone tradeoffs), heavy machinery, transportation, civil construction, … in fact, is there any sphere of human activity where some other country has not hit a better tradeoff than India? Do I hear software consulting? Much of the outsourcing band is looking at Russia and East Europe now in preference to India.

    “poor human capital quality [...] is really the key issue, which would need policy support (education, vocational training, etc)” — exactly. But pretend you are an Indian politician and decide which way you want to go. If you increase FDI and cut deals, both over and under the table, with MNCs, you line the coffers of your crotch-droppings rapidly. Implement policy support for human capital development (and this is very very hard work that takes 20–30 years to mature) and you get essentially nothing in return.

    “China could do it via dictatorship, India is going to find it way tougher, but its the only way out. No other option.” — there’s always the option of wasting away, which is what we are doing.

    “I hope people will be able to distinguish between responsibilities of companies vs responsibilities of regulators.” — No they won’t. Read comments by middle-class Indians armed with computers on any newspaper or even Cartoons Against Corruption to see how immature Indians are in understanding and implementing market-oriented democracy. To get back on track (and India is way out there off the tracks) a non-democratic education and birth control reset is a must. Nothing else is worth discussing.

  • gaurav

    @DJ , @OG… great comments and very reasonable too. DJ, your thoughts make a lot of sense, but try thinking a little bit from the perspective of small scale workers, who have a tough time making ends meet, working at rural , semi-urban areas. Asking them adapt to changing market needs and starting a new profession is asking too much, specially when this Government would never compensate or offer them any capital cushioning through policies. There is a growing disparity between the rich and poor now, and the FDI in retail sector, (that too 51%) would increase this gap even further.

    A far better choice at this juncture, would perhaps offer an viable option or mechanism to minimize the impact of FDI to these sections and bringing FDI in a phased, well thought out manner. I dont understand thought process or intent of Congress. The FDI has been lingering for years now, they had enough time to think over it, offer a better package of FDI which has less detrimental effect and was more acceptable across the states. But MMS chose to act impulsively due to criticism from western media. Its far too complicated now, where rather than being a central policy implementation, it is a discretionary option.

    India does not need a PM, who takes decisions when his personal image across the world is questioned. Was he sleeping all these years??

    Markets are soaring as I write this, Its time we have a strong presence of rural and semi-urban india at markets somehow, that would balance out things which are titled heavily towards corporates.

    But see the impact of FDI, Congress image has improved and nobody talks abt COAL now. Congress has succeeded again and India has failed yet again. Hail Manmohan singh

  • og

    @gaurav “But see the impact of FDI, Congress image has improved and nobody talks abt COAL now. Congress has succeeded again and India has failed yet again.” — Exactly. This is why democratic paths to reform will never work here; uninformed people without a capability to make good judgments vote, and clever, informed people do not. Atanu’s blog isn’t nearly enough to make me want to vote. I refuse to vote in a system where my vote is worth the same as someone who does not understand how Monsanto or Walmart operates, and how they are likely to operate in India. When I consult for companies, they pay me based on my reputation and their expected payoffs, not a flat rate. The GoI has to go a long way before people feel any ownership in the democratic process. One can keep hand-wringing and say “democracy is everyone’s headache” but you see the result: middle class Indians will just speak with their feet.

  • DJ

    OG, Not that I like Churchill, but I am reminded of a couple of lines attributed to him. :)

    “The best argument against democracy is a five-minute conversation with the average voter.”

    “It has been said that democracy is the worst form of government except all the others that have been tried.”

  • Ramshankar

    What personal attack? All those people bitching “personal attack, personal attack” are not point out what the personal attack is!

  • gaurav

    @Ramakant, Some examples out of many personal attacks on PM- Time magazine underachiever, Washington post Poodle slur..etc. etc.. MMS has always been very conscious of his image across western countries and used to point out (he does speak after-all) his “good image” across the world, even when Indian economy was in shambles..

    @OG – India is in such a state because of educated people like you who dont vote because of varied reasons… My personal opinion – if you dont vote, you have no right to criticize. You are indirectly helping out the primary reason for India’s perpetual decline – Congress.

  • Swapnil

    Manmohan appealed to unleash animal spirit, it seems to have worked on me. I’d like to bite his @ss off !!!

  • Teja

    Move will lead to large-scale job losses. International experience shows supermarkets invariably displace small retailers. Small retail has virtually been wiped out in developed countries like the US and in Europe. South East Asian countries had to impose stringent zoning and licensing regulations to restrict growth of supermarkets after small retailers were getting displaced. India has the highest shopping density in the world with 11 shops per 1,000 people. It has 1.2 crore shops employing over 4 crore people; 95% of these are small shops run by self-employed people
    Governement says the FDI in retail creates 10 million jobs, but replaces 40 million jobs – 30 million job loss

    Comparison between India and China is misplaced. China is predominantly a manufacturing economy. It’s the largest supplier to Wal-Mart and other international majors. It obviously cannot say no to these chains opening stores in China when it is a global supplier to them. India in contrast will lose both manufacturing and services jobs.

    Stop comparing China with India in this regard . Chinese walmart gets supplies from China, Walmart if in India also gets products from China . Crap, sell chinese goods in India…

    Jobs in the manufacturing sector will be lost because structured international retail makes purchases internationally and not from domestic sources. This has been the experience of most countries which have allowed FDI in retail.

    * Argument that only foreign players can create the supply chain for farm produce is bogus. International retail players have no role in building roads or generating power. They are only required to create storage facilities and cold chains. This could be done by governments in India.

  • vinay

    hi

    you are saying that fdi is a good thing but tell me one thing. what good has it done to those nations where it is already present? and what would happen if big retailers come here and try to get patent of goods that we are using in our daily life?

  • vinay

    and i hope you remember ricetec case in 90′s

  • Suramya

    Atanu,

    I am a believer of a market economy and the dire need of reforms in India to reduce government involvement in business. However, based on the above comments, it seems many people are worried about the lack of manufacturing base in India and therefore a chance of more Chinese products being dumped in future with organized retail (because of their efficient supply chain management and ability to move vast amount of goods around the world).

    My question to you is:

    (1) Is there a ‘preferred’ sequence of reforms that should happen in India? I mean to ask should the infrastructure be improved and the agriculture reforms be done first before liberalizing the retail sector? What reforms do you consider more important and what sequence would you follow among power sector, healthcare, education, agriculture, retail, and many other reforms that are needed..

    (2) Is the GOI following any sequence in the liberalization of the economy in your mind?

    Thanks in advance.
    Suramya

  • Gaurav

    @Teja great post. I will ask a simple question ? How did USA become great economy .. They did not have FDI ? Did they?
    Why can’t india improve its storage infrastructure , offer better distribution networks, improve inventory and supply chain? Certainly it’s not rocket science is it? We dont want Walmart to teach us these.. Speaking of rocket science .. India can send a rocket to moon but it cant build these????

  • RC

    The near unanimous opposition to FDI in the comment section shine a pretty good light on the thinking of the educated people of India. It is sad that anti-commerce, anti-engagement thinking is so deep rooted.
    The conspiratorial thinking would be hilarious if it weren’t so sad and damaging.
    With this attitude of the people even if the government allows, I dont think any sane retail company would want to invest in a hostile environment like India.
    Perpetuation of poverty by inward thinking ….

  • Gaurav

    @RC nobody is opposing FDI just for the heck of it. I or people who have opposed FDI in the comments section may be wrong but we have some apprehensions , why can’t u answer them first?
    For starters – why dont you enlighten us by answering @suramya apt question of sequence of reforms even if sounds “hilarious”to u.

  • og

    Read on a random Web page: “If we have to do your thinking for you, then it becomes our civilization.”

    Cold storage is not exactly rocket science. (Actually, even rocket science isn’t rocket science.) India has enough knowhow to do cold storage. India has enough knowhow to coordinate Mumbai dubbawallahs, a massive 6-days/week operation with very low failure rates. Certainly we grant enough MBA diplomas who are supposed to know demand monitoring and supply chain management.

    If, in spite of all the above, we cannot manage our retail distribution as efficiently as the incoming predators, we do need to capitulate and give it all away to them. It is pretty much 100% their civilization already anyway.

  • Gaurav

    MMS spoke finally. “money does not grow in trees” he said. Sure it does not unless ofcourse there is an environment scam. Money grows underground (coal) , money grows in thin air (2g), money grows in deep space (isro devas). Boy they haven’t left anything.

  • tp

    @Gaurav said “India is in such a state because of educated people like you who dont vote because of varied reasons… My personal opinion – if you dont vote, you have no right to criticize. You are indirectly helping out the primary reason for India’s perpetual decline – Congress.”

    Perhaps time to read Don’t Vote! It Just Encourages the Bastards by P. J. O’Rourke, American political satirist.

  • gaurav

    @tp. Maybe the book will be a good read even though reviews suggest otherwise. It seems your solution is to not vote and get frustrated for 5+ years while my solution is to create awareness, vote and maybe get disheartened at the outcome – but be satisfied that ” I tried”. No offense please, but I really hope we see less of such armchair intellectual critics.

  • Prakash

    Hi Atanu,

    I noticed that you don’t have an article up on NitiCentral for almost 8 days now. Previously, it was around 2-3 days. Is there an issue? Editorial differences? Did they come down on you for disagreeing with the BJP party line? I’m just curious, please don’t interpret the questioning as hostile.

  • http://www.deeshaa.org Atanu Dey

    Hi Prakash,

    I have been quite busy traveling around the country and did not find the time to write for NitiCentral. Besides, I am lazy. I have not even replied to most of the comments to this post.

    I think I will start writing in the next couple of days.

    Regards,
    Atanu

  • Ashish Deodhar

    Hi Atanu

    Glad to hear that you support FDI in retail. That brings me to ask you this question:

    Narendra Modi recently made a comment endorsing his opposition to FDI. Link here: http://www.narendramodi.in/cm-strongly-opposes-fdi-in-retail/

    Since you are his great admirer, to the extent almost being his worshiper, how do you read his comment? Would you still back him to be the next PM of India if he continues to oppose FDI?

    Look forward to hearing from you.

    Cheers
    AD

  • RC

    @Gaurav,
    The “preferred” order of reforms is not something that can be agreed upon universally. There is politics involved and those making decisions have to think about getting elected too. Each party is going to have their constituency that they would like to keep happy first.

    UPA is basically the worst possible government that India can ever have. They are a bunch of washed up “jhollawalas” who have hurt the poor more than the terrorists of Pakistan can ever imagine doing.

    But with their backs against the wall they had to pick something for reforms. So they picked something that will potentially help the farmers that way they can keep the “jhollawalas” somewhat happy (Its a different thing that they are not happy). Now this decision obviously hurts the small shopkeeper in the short term, but they are supposed to be a core constituency of the BJP, so it is quite obvious. Herein lies Mody’s opposition to the policy as well. Mody is probably the only leader in India who understands economics a little bit (I dont count MMS in leaders because he is not one and I dont think he is even pretending to be one). But Modi is also a politician he has to win votes. He is not going to inherit unlike the dumb princes of a certain family.

    Reform is power and infrastructure are in fact harder to achieve as power has been used by so many parties in India as a tool of political patronage. Only strong leadership such as Modi’s (he has already done it in Gujarat) can implement this. Meek, dithering bureaucrats cannot even dream of touching this sacred cow (called power).

    Modernizing retail will help farmers as the middleman will go away (reduce not completely go away) resulting in increased income. Efficiency will improve. Jobs in the organized retail sector would be desirable job that come with verifiable income which will enable employees in these sector to have access to banking….
    There is more but there is limited time.

  • tp

    @RC: “UPA is basically the worst possible government that India can ever have.” — Never lose faith in the future!

  • gaurav

    @RC – you make a lot of sense. I just hope that these last “minute” reforms dont turn the tide towards UPA coming back to power again post 2014. They have cleverly portrayed as if it was due to Mamata that reforms were not implemented. I fail to understand on why BJP consistently fails to utilize so many opportunities to throw this Govt out of power. It is very important that India votes out congress decisively – there has be to a strong message sent to politicians that they cannot get away with anything. Hopefully then and only then there would be a deterrence.

  • tp

    @gaurav — No offense taken. I used to believe in action too. Some sections of the Indian middle class really tried hard to turn things around between 1950 and 1980. You will find echos of this in (Hindu) families that tried to work things out in Bangladesh between 1930 and 1945. Gradually, realization dawned that emigration was inevitable. The clever ones who got it early settled well into India. The ones slower on the uptake were killed, or hoarded into India on refugee trains, gold ornaments concealed in seams of women’s clothes, rifled by soldiers, swindled by real estate agents, … it’s all history. India at large echoes that stage now. The middle class is desperately exporting itself to any other country possible under any terms whatsoever. A few crazy ones, ones without means, and ones with hopeless family tangles, are left behind. Sit back and enjoy the show, it will be a real thriller ten years out. Not that it’s bland today.

  • DJ

    I don’t quite understand this worry about FDI causing flood of China products into India. That is already the case, FDI or not. Even domestic money will import from China, if it is cheaper. And, the duties that apply on imports (in order to support domestic businesses) will still apply. I don’t think sequence of reforms matter. In fact, if they are linked, any one measure may hasten other reforms.

    Someone mentioned that US does not or did not have FDI. That is a stupid statement. Here, I’ll help you:
    http://labhi.staff.umm.ac.id/files/2010/12/U.S.-National-Security.pdf
    http://www.ehow.com/about_7458397_foreign-international-investment-theory.html

    Those saying that we don’t need to be taught X or Y. I think we do. The IPL production team is from Australia. Various key technical components of CWG were outsourced to companies in Australia and UK. Delhi airport, which is a source of pride, had an international partner with GMR. GMR alone would not be able to do it for sure. Same with F1 track, Delhi metro (coaches came from Korea and Germany), etc, etc. Know how and implementation experience is important. Once know-how is implemented within the shores, domestic companies pick up on it and start to provide the same thing cheaper. That is the nature of business. Metro coaches are now built by the same foreign company, but in Gujarat. Similarly, with cars, due to heavy import duties, foreign companies initially imported, but then moved to domestic production.

    People need to get out of their colonial hangover. Walmart already has a partnership with Bharti. I don’t see any opposition to Bharti because of that, or the opposition to China-made mobile phones, computers, etc? FDI is anyway limited to 51%, its not 100%.

    Yes, it is prudent to worry about crappy goods, dumping laws, crony capitalism, excessive profiteering, corporate ethics, national security, etc. But, like anything else, like domestic investment also, FDI can be used for the better or for the worse. FDI by itself is not a magic wand, but it could be a useful tool to speed up growth.

    There is also the opposite worry. In developing economies, many foreign companies lose money in spite of operating ethically, because of misplaced nationalistic sentiments or govt corruption, ad hoc change in rules, etc. In a globalized world, it would be a mistake to think in those narrow terms.

  • Debasish

    If FDI can adopt direct purchasing system (purchase directly form producer and deliver directly to consumer) in India which will really can bring economical revolution then why our govt. is not adopting the same system in Indian market with Indian investors and companies in stead of inviting FDI.

  • DJ

    Debasish, because the govt thinks it can find foreign investor bakras to fleece. Indian investors are smart and don’t want to get into it unless the govt can deliver a good policy framework. In other words, its an easy way out for an inept and corrupt govt.

    Have you seen the govt presentations that are up on its websites, and that it gives to foreign investors to lure them into investing here? There was a speech by MMS to babus about tackling the slowdown and the key message was: “we need to improve our image” and “send a message” to foreign investors about investing potential.

    There was no talk of improving the domestic policy framework or the functioning of babu-cracy.

  • http://bartvandelay.blogspot.com Amit Kumar

    Indeed, it’s all karma. Here is a good piece that puts the FDI issue in perspective: http://bartvandelay.blogspot.in/2012/12/fdi-in-india-is-terrible-ideanot.html