Alt Sarkar Finance Minister Jayenaar on promoting investment in India

Suggestions on generating more investment and FDI in India

The Prime Minister is making a tremendous effort to attract foreign investment into India. This is vital for the prosperity and welfare of millions of Indians. However, however, his efforts are both misplaced and misguided. Here’s why-

The very intensity of his pitch and the necessity for it is testimony to the lack of attractiveness of India as an investment destination for capital.Nor is this the first time the Prime Minister of India has made such a sales-pitch. His Make In India pitch dates back to 2014. The necessity for that case to be made again is testament to the failure of the various initiatives, including Make In India,thus far to secure any meaningful and significant inflow of investors dollars into the country. Indeed if the NDA Govt’s 1st term had succeeded The Prime Minister would have enjoyed the luxury of laying down preconditions on foreign businessmen wishing to invest in India, such would have been the clamour for being allowed to open shop in India. The Govt appears singularly to have misunderstood the role of the personal charisma of the Prime Minister in securing inward investment. It is neither absolutely necessary nor in and of itself a sufficient condition for a foreign business house to risk its capital in India. The fact is that all we need to attract inward investment is the right business-friendly environment. The following are both necessary and, when present in meaningful measure, sufficient to attract investment. These are:

  • An educated skilled workforce ready and able to pick up new skills
  • A regulatory environment that is clearly set out with no hidden surprises, fairly and consistently applied
  • A tax regime that is fair, predictable, certain, and consistently and nonVindictively applied.
  • a set of labour laws and regulations that protects workers AND allows employers the flexibility they seek to expand and contract.
  • a system of laws, justice and arbitration that guarantees the smooth and impartial settlement of disputes that may from time to time arise.
  • a system of independence of regulatory and other agencies that guards their integrity and impartiality
  • a social environment that values, promotes and protects a harmonious and peaceful interaction between sections of people. Violence on the streets repels business investment.
  • Last but by no means least, the elimination of petty venality and corruption. When a businessman needs to deal with a politician to get a routine clearance something has gone seriously wrong.
  • Corruption carries with it the fear of corrupt prosecution and inhibits investment.

The fact is that NONE of these conditions obtain in India to any greater extent than they applied before the transfer of power in 2014. In the absence of factors that make inward investment more attractive, merely appealing to business leaders must fail. In the presence of these factors an impassioned appeal to business leaders is redundant. They will be knocking on India’s doors. Yes, demography is on our side, but only if the young people have the education and the skills will it turn into a dividend. Yes decisiveness helps but it would help far more if all the agencies down the line worked decisively to a set of known and published procedures. It does not help if the only decisiveness is Ministerial decisiveness – arbitrary and unpredictable. In summary, attracting foreign business investment is vital but it will take more hard work, more consistency of policy than we have seen thus far.

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