100% FDI – A Game changer for India

Recently Government of India lead by Prime Minister Shri Narendra Modi announced a major policy change which could lead to a windfall for the economy of India. Government allowed up to 100% Foreign Direct Investment (FDI) in Aviation, Pharmaceuticals, Defense and Retail. This is a historic decision given India’s fear of giant multinational companies since gaining independence in 1947. India, which gained independence after a 200 year British rule started by East India Company has always been vary of allowing another big multinational company to set up business on Indian soil without a control of Indian government.

With this decision of Modi government, the fears have again crept back into the minds of thousands of Indians. They have started criticizing the government alleging that it is again staking the sovereignty of the country.

However, the fact is that these fears are baseless. India of today is not the same as the India when East India Company first landed on its shores. Today India is being governed according to a well drafted constitution which binds the entire nation together and ensures that no force can disturb the thread of unity of this country. The time when the British started expanding their rule over India, the only binding force in the country i.e. The Mughal empire was on decline and the country was divided into numerous princely states with vested interests, with not a single state thinking about protecting their motherland from the claws of foreign power. That was the reason for the 200 years of slavery that our ancestors faced.

However, today India is one of the strongest economies in the world as well as the largest democracy with a strong government. Moreover, since the last two years, the government is trying to get private investment in the manufacturing sector through various schemes and has even tried to get foreign investment through partial FDI schemes. However, it has failed to get the desired results. Private investment within the country is growing at a negligible rate and the multinationals are not willing to invest under government interference.

However, the 100% FDI does not mean that the companies are free to work as they like. The government would keep a check on their working would always be there to protect its citizens against any kind of malpractice. The government would not be interfering with their working but the guidelines and framework for their operations would be provided by the government.

Another factor leading to a strong protest against FDI is the fear that it will affect the livelihood of small businessmen and local shopkeepers. It has been assumed that Indian businessmen are incapable of competing with giant multinationals. This is true up to a certain extent, because the quality of products and services that are being offered to Indian consumers through these small businesses and local stores is almost very poor. But the question arises that why the consumer should be forced to pay more for the inferior quality of goods and services when he/she can get much better quality at a reasonable rate because of economy of scales that these multinationals come with?

In my opinion, it is an opportunity for small businesses and local stores of India to compete with the best and in the process to improve their quality of operations so as to provide the consumer with the alternatives. In the long run it would provide them with opportunity to create a name for their business and expand their operations in India as well as outside India.  Also it is a great prospect for the consumer as they will have access to better quality of goods and services at competitive rates.

Now let us come to the biggest gain for India through FDI. India is a young nation with the majority of the population in the age group of 20 to 40 years. Every year the size of this segment of the population is increasing and it is the responsibility of the government to ensure that there are jobs for them.

 

With this FDI policy India would be a preferred destination for investment for the big multinationals. The sectors where FDI has been allowed have the potential to generate millions of jobs and thereby increasing the spending capacity of the population of the country which would push the economy forward in a big way.

As a country we should be thankful to the government of this country to take this bold step and thinking beyond the traditional vote bank politics and working for the development of the country. After decades we have a Prime Minister leading a government in India which is working day and night for the development of the country. We should look at the long term positive effects of the decisions being taken by the government and based on that should pass on judgments on their work. There is a difference between making promises at the time of elections and actually delivering on those promises. We need to have an eye to spot that difference.