Global Times correspondents in India: Yuan Jirong, Zou Song
Modi government has launched a second round of drastic reforms to attract foreign investment, the core of which is to continue to increase the proportion of foreign ownership, promoting employment. Modi said that at present India has become one of the most open countries in the world for FDI. New jobs should be created by attracting foreign capital, promoting national transformation. However, Modi’s new FDI policy is also facing a lot of questions while ushering in cheers.
Under the new policy, India will be fully open to foreign investment in nine areas such as civil aviation, food processing, pharmaceuticals, etc., cancelling all or part of the technical standards regarding investment projects as well as the restrictions and demands on foreign brands producing in India. In India, under the prerequisite of being able to obtain “modern technology” through some FDI projects, foreign investors are allowed to have 100% holdings in these industries. After this round of amendments in the FDI policy, more than 90% of foreign investments in India don’t need government approval.
India blazed new trails in 2015-2016 fiscal year in attracting foreign investment, in all attracting 55.45 billion US dollar worth foreign investments— an increase of $ 19.42 billion compared with the previous fiscal year. Gurgaon area—which is 30 kilometers from the capital New Delhi— where this reporter lives is India’s third largest city in terms of capital inflows. In 730 square kilometers of land, more than 50 percent of Fortune 500 companies are concentrated; multinational corporations are everywhere, and the place is known as the “office of the world”. This is a vivid portrayal of rapid economic development promoted by attracting foreign investment in India.
Nevertheless, in India’s GDP in the first quarter of this year, public and private investment on equipment shrank by 1.9% from last year’s. If India wants to achieve high growth, it still needs further relaxation of restrictions, in order to enhance the power of attracting foreign investment. Professor B.R Deepak from Center for Chinese and Southeast Asian Studies, Jawaharlal Nehru University of India, told this reporter that, if at this stage India wants to maintain a high economic growth, it needs to attract a lot of foreign investment, and through these funds and the technology brought by them India’s manufacturing industry should be promoted, creating more jobs, and thus achieving the process of industrialization and modernization of India.
Mr. Kumar Kaputa has been engaged in foreign trade of textiles for the past 20 years in India, and in recent years his company has seen double-digit growth of annual turnover. He told this reporter: “A series of moves by the government in opening-up are encouraging. Some of my foreign partners are all the more interested in investing in India to set up factories. However, at present, the investment risks in many areas are still great in India”
Mr. Huda, a Professor of Economics at Aligarh Muslim University in India told this reporter that India is still not an easy country to invest. In the Doing Business Report published by the World Bank, India ranks 130 in the ease of doing business. The new FDI policy launched this time is helpful in further attracting foreign investment. But in the future, sectors like IT will be more benefited, promoting a short-term economic prosperity. It is difficult to bring benefits to a quarter of the Indian population who live under the poverty line.
A report in India’s “News eye” website titled “Modi’s new FDI policy: real change or fooling the markets?” reported that, although India is already the largest recipient of FDI, the problem is that just 6% of it went into manufacturing in 2015. Without the manufacturing sector getting a boost, India wouldn’t be able to create jobs. The impact of the new FDI policy launched this time in attracting foreign investments and creating jobs will not be great; it can be said to be a continuation of last year’s new FDI policy.
(Global Times, New Delhi, July 19)