August 08, 2020
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Opinion | Beware! If Foreign Companies Dominate Every Indian Sector, Self-Reliance Can Go For A Toss

China offers an exceptional model to demonstrate how FDI can be attracted and retained. India can learn from them, writes Santosh Pai of Institute of Chinese Studies

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Opinion | Beware! If Foreign Companies Dominate Every Indian Sector, Self-Reliance Can Go For A Toss
Opinion | Beware! If Foreign Companies Dominate Every Indian Sector, Self-Reliance Can Go For A Toss
outlookindia.com
2020-06-06T07:54:39+05:30

Yes, this is a call for ‘Make in India 2.0’. The recent announcements reflect a more granular understanding of specific issues like land availability and flexibility of labour. However, availability of skilled labour, efficient tax incentives and reliable electri­city supply are few more issues that need to be addressed.

We need to understand what self-reliance means. Do we want Indian companies to make capital investments and start manufacturing activity? Or do we want to attract foreign capital without protection for dom­estic firms? The former requires far reaching reforms to incentivise domestic firms. The latter can be achieved with PMP-like programmes, but in the long term domestic industry may be decimated. That will not be true realisation of self-reliance because every sector will be dominated by foreign companies.

China offers an exceptional model to demonstrate how FDI can be attracted and retained.

Maybe a combination is the best compromise where Indian companies can gradually move up in the value chain, while foreign investors continue to bring in capital and technology that is not capable of being realised through domestic sources. A robust programme to achieve self-reliance will require rigorous long-term planning, ruthless execution, and transparent market mechanisms.

India certainly has the potential to attract more FDI. The need is to focus on keeping existing foreign investors satisfied. This will encourage them to expand their investments, and more investors will follow suit. Government needs to operate like a business to attract FDI. There should be good marketing, sales and consumer satisfaction.

Today, there is a tragic shortage of grievance redressal for foreign investors. After the initial announcements, the government loses interest in ensuring that foreign companies are able to make profits. This is not a sustainable approach. China offers an exceptional model to demonstrate how FDI can be attracted and retained. We don’t have to ape the Chinese but extracting a few lessons from their experience can be valuable.

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Honorary Fellow, Institute of Chinese Studies

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