HVK Archives: Blurred Priorities
Blurred Priorities - The Times of India
Editorial
()
22 August 1996
Title : Blurred Priorities
Author : Editorial
Publication : The Times of India
Date : August 22, 1996
Amongst the biggest of the foreign direct investment
proposals approved by the present government are those of
Perfetti (for the manufacture of toffees and chewing
gum), Warner Brothers (for the setting up of cinema
complexes), Bloomberg (for a wire service network),
Quaker Oats, Coca Cola and BMW-Hero Cycles. Ale Coca
Cola proposal for setting up two subsidiaries alone
accounts for nearly a third of the total investment of
some Rs 9,000 crore approved in the past couple of
months. This distinct skew in favour of consumer goods
projects looks strange, coming as it does from a
government which swore to discourage foreign investment
in low-priority areas and encourage the same in
infrastructure and technology intensive sectors.
Especially so when there is evidently very little
simultaneous action to remove the hurdles constraining
inflows of high-priority FDI (while much has been
approved since the reforms process was started in 1991,
what has come by way of actual investment is
proportionately low.) Power has no doubt seem some
activity, with the government committing itself to
granting all clearances quickly; but the sector's
attractiveness would still depend on how fast the state
electricity boards can be cleaned up. As for other
sectors, things are infinitely worse. The situation in
telecom has become so muddled that foreign partners are
looking for excuses to get out. In roads, the idea of
building supernational expressways with foreign
participation has reportedly been shelved. In ports,
mining and oil exploration, there is nothing to show that
the government is anywhere close to finalising viable
policy frameworks.
The liberalisation of foreign investment was expected to
bring two critical benefits: add to capital where it is
lacking, and enhance India's technological capabilities
and thereby its export competitiveness. Here, the record
to date is disappointing. In the period since 1991,
while little has flowed into infrastructure where there
exists a severe shortage of funds, as much as 54 per cent
has been accounted for by consumer goods and the service
sector, including such areas as automobiles, detergents,
breweries, cigarettes, decoratives, hotels and tourism.
Even in these latter the dominant concern appears to be
to cater to the domestic market, not to make the country
a hub for exports. Ale surge in exports in the past
three years has been largely on account of primary
products and rather low-end manufactures, India's
traditional export items. Indeed, in areas where foreign
investment was expected to benefit higher-end products
such as chemicals, machinery, telecom and transport
equipment there has actually been a decline in export
growth in comparison to that in the five-year period
immediately ceding the reforms. Clearly, a change of
tack is in order. After all, FDI also has potential
costs in terms of loss of savings through profit
repatriation or lower employment growth through
displacement of less capital-intensive processes by more
capital intensive ones. The best way to ensure that
these costs do not overwhelm the benefits is to direct
FDI primarily towards strengthening India's technological
and infrastructural capacities. Industry minister
Murasoli Maran's eagerness to raise actual FDI flows to
$10 billion per year is eminently understandable. But
that is unlikely to happen unless he is prepared to shift
his focus away from colas, cinema complexes and chewing
gum.
Back
Top
|
