Millennium Post

FDI must submit to democracy

Foreign direct investment [FDI] has always been a touchy issue in India right from the days of Nehru. It passed through uncomfortably in the Indira days and then got acceptability in the Rajiv era and onwards. But, opposition to it has stayed as well. FDI in critical sectors not only creates the issue of national ownership to economic activity, it also directly addresses the government’s priorities.

The FDI policy in multi-brand retail and aviation are based on the premise that more investment means better growth and better growth means more jobs and more money for social policies. However, the country is still waiting for the current prime minister’s famed trickle-down theory to be realised more than two decades after he oriented India’s economic policies towards the market. Though India’s expenditure has grown manifolds in defence, urban planning, setting up industrial zones, etc., its spending on health, education, rural development, etc. has stagnated. The governments of the day have rather chosen to tinker with the definition of poverty to convince themselves that the number of poor have declined.

Before the government goes ahead with its decision to force its decision on the people of India, it should remember three things. First, most political parties, including a few within the United Progressive Alliance, are opposed to the new policies. Which means that a majority of Indian people do not want more foreign money. During the Anna movement, the government kept saying that the movement challenged the democratic principles of the country by questioning legitimacy of political parties. Now is the time for the government to show that it does not play with this principle of democracy and agrees with what a majority of Indian people want.

Second, the government should know that concentration of economic activities in clusters only shifts jobs. It can’t create more jobs, as is being claimed. Unlike in the case of software parks, where the job shift took place from the West to India, the job shift in retail will take place within the country and thus not add to job growth. At best, it can happen from one state to another.

Thirdly, the investment-heavy approach will address only the supply side of the economy. It cannot create demand. Though, technically, building inventory can add to the growth numbers, it is hardly a desirable situation. Unfortunately, the government seems to be doing just that.

What the economists have ignored, the street-fighting leaders, like Mamata Banerjee, know by instinct. That the argument of job creation through FDI is specious. That it will take away much more from the people of India than it can give them. Let’s be democratic, let’s be just while designing our economic policies.
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