February 25, 2020
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IF our next government is a Congress one supported by NF-LF elements, one can expect, at the very least, some restrictions on TNC entry and on setting up 100-per cent subsidiaries except in hi-tech sectors. In fact, a slowdown on TNC approvals seems on the cards whichever coalition comes to power. The variation will be only in the level of restrictions: the most for an NF-LF-led coalition, and less for the other two coalitions.

Of course, the Congress will not admit this, since it has to keep claiming bravely that it can form a government on its own. "Foreign investment is needed to bridge the gap between domestic savings and resources required to reach a GDP growth of 8 to 9 per cent envisaged by the Congress," says Mukherjee. But to sustain this growth rate, India needs to raise its savings rate to between 30 and 32 per cent against the current tally of 24 to 25 per cent. "If you want that balance of 6 to 7 per cent, then you will have to permit foreign investors who have the investible resources," argues Mukherjee. "Our aim is to attract close to $10 billion per annum so that the Indian economy can truly experience the alchemy of trade and investment-driven prosperity."

The BJP, of course, treads a very careful line as far as the TNC question is concerned, balancing liberalisers like Jaswant Singh and pro-swadeshis like Murli Manohar Joshi. A BJP-led coalition will allow new TNCs in, depending on the sector—infrastructure, hi-tech, export-related. No 100-per cent subsidiaries; Indian partners will be made mandatory. And definitely no new consumer non-durable TNCs, about whom a Congress coalition will have no problems.

A Third Front government will surely clamp a host of restrictions on TNCs. Says Jaipal Reddy: "Indian companies can compete with TNCs only if liberalisation is preceded by 'levellisation'. The Janata Dal is for insulating the Indian economy for a certain period, before it is opened up, as was the case with Asian Tigers like South Korea. We are for tie-ups with TNCs to bridge techological gaps only." He is even against dominant TNC presence in the infrastructure sector. 

This is surprising since there is no way that the $200 billion that the sector needs in the next 10 years—by Reddy's own calculations—can be raised without massive TNC investment. FICCI Secretary General Amit Mitra says that to make the TNCs' role more effective, it is necessary to assign them dominant, leading and supportive roles in various sectors so that their expertise, management prowess and finance can give a critical push to the Indian economy. A FICCI analysis has indicated that India can effectively absorb foreign investment worth $30 billion annually, especially in the power, expressways, telecom and food processing sectors, where TNCs can play a dominant role.

Says ASSOCHAM Secretary General V. Raghuraman: "The shareholdings of the TNCs should be left to the individual corporations concerned. Barring sensitive areas, placing restrictions on TNCs would not lead to the desired results. TNCs may lack the trust in building up long-term strategies and to bring in the latest developments." And M.G. George, chairman, the Muthoot Group, has a suggestion: "If a ceiling of around 15 to 20 per cent is fixed in respect of repatriation of profits, then even 100-per cent subsidiary or sharehold-ing can be allowed."

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