Lok Satta welcomes relaxation in FDI norms

Lok Satta Party national President Dr. Jayaprakash Narayan today welcomed the hike in limits of foreign direct investment in a number of sectors saying that foreign currency flows in the form of equity are desperately needed in the short term to stem the rise in current account deficit (CAD).

In a media statement, Dr. JP said that in the present globalized world what matters most is not the source of investment but enhancement in productive capacity, creation of jobs and promotion of exports. India’s current account deficit stands at a record five percent of the gross domestic product. Both the Indian Government and entrepreneurs have to repay debts of over $100 billion in the next few months. In the absence of foreign currency inflows, debt servicing will become a huge burden.

Dr. JP said that a high CAD is resulting in rupee depreciation which in turn results in prices of fuel and fertilizers galloping and the Government’s fiscal deficit shooting up. Against such a backdrop, attracting foreign direct investment in the short term is absolutely imperative.

Dr. JP said that measures to attract foreign investments are necessary but not sufficient. Liberalization of foreign direct investment in retail has not seen any significant results so far. Many Indian investors are wary of investing in new ventures and expanding existing ones. Huge investments already made in sectors like roads, power plants and coal mines have become unproductive and are turning into non-productive assets.

Dr. JP said that abnormal delays in decision making, absence of a level playing field, lack of transparency and fair competition and monumental corruption have all contributed to undermining investor sentiment. In addition, the reckless rise in Government’s expenditure in unproductive sectors has been seriously eroding our production base and competitiveness.

In the long term, there is no substitute for laying emphasis on the manufacturing sector and making our exports competitive.

“We have to produce more and sell more to the rest of the world if we have to get over current account deficit problems. I appeal to all parties to transcend party affiliations and ideologies to join hands and address the challenges plaguing the Indian economy. Our single-minded focus should be on manufacturing, jobs and exports.”