GD Topic Series : Is FDI Good or Bad for India - Part 2

Critical analysis of FDI in India

In part 1 of this series we saw the details of FDI in India, what it means and what it can do. Lets analyse the situation further. In recent years, given rapid growth and change in global investment patterns, the definition has been broadened to include the acquisition of a lasting management interest in a company or enterprise outside the investing firm’s home country. As such, it may take many forms, such as a direct acquisition of a foreign firm, construction of a facility, or investment in a joint venture or strategic alliance with a local firm with attendant input of technology, licensing of intellectual property,   In the past decade, FDI has come to play a major role in the internationalization of business.

This was all about the sectorial study of FDI. This still remains the question that will it be really boosting the economy as promised? Will it try to mobilize what the government has been promising? Will it provide employment opportunities or the investors are just interested in harassing the cheap labors in India and utilize it for their benefit? On the contrary some of the major benefits of FDI :

(a)  Improves forex position of the country.

(b)  Employment generation and increase in production.

(c)  Help in capital formation by bringing fresh capital.

(d)  Helps in transfer of new technologies, management skills, and intellectual property.

(e)  Increases competition within the local market and this brings higher efficiencies.

(f)   Helps in increasing exports.

(g)  Increases tax revenues.

Merits of FDI

FDI has lot to advantages to its favour which can be summarized as below:

1) More consumer savings

One of the biggest advantages of FDI is that it will increase the savings of Indian consumer as he will get good quality products at much cheaper rates. Consumer savings are likely to increase 5 to 10% from FDI.

2) Higher remuneration for farmers

Another advantage of FDI is that it will help a lot in improving the miserable condition of Indian farmers who are committing suicides on daily basis because of lesser return from their agricultural produce. But FDI will certain help a lot in improving their conditions as the farmers are going to get 10 to 30 %higher remuneration because of FDI. Well over 30% of food staples produced in India spoils because poor infrastructure , this things improves by the help of FDI.

3) Increase in employment opportunities

FDI is certainly going to increase the employment opportunities in India by providing around 3 to 4 million new jobs. Not only this another 4 to 6 million jobs will be created in logistics, labour etc. because of FDI.

4) Increase in government revenue

Government revenues are certainly going to increase a lot because of FDI. Government revenues will increase by 25 to 30 billion dollars which is a really big amount. This government revenue can help a lot in the development of Indian economy.

Conclusion

After taking into consideration both pros & cons of FDI one can safely say that although there are certain consequences about FDI in India by the local Indians, but all these fears are unfounded. There is hardly any truth in the fact that it would destroy the small entrepreneurs in India rather it will be beneficial for both the consumers & farmers of India. So, the future of India lies in FDI & the government must proceed in that direction if it wants to make the Indian economy a developed economy.

About the author: Sunil Sahu is an electronics and telecommunication engineer and a die heart defense aspirant. He loves cooking and has a vast knowledge about cars and their latest developments. Through this article he wants to help defense aspirants by presenting his critical views on the topic, on the forum so that collective exchange of thoughts can take place. (Edited and reviewed by Jayendra Pratap Singh)