- Poor governance cost us dear
Poor governance and the lack of reform are keeping this country poor as it is driving overseas investments away. Lack of investments will help keep this country poor for some more years and few decades to come. What will happen to the big dream to see India as Developed Nation by our Ex-President APJ Abdul Kalam?
According to the United Nations Conference on Trade and Development - UNCTAD's World Investment Report 2011 (WIR11) which was released by the UN Office in Geneva shows the global economy is coming out of the woods but India is missing the opportunity. Foreign investments in India are reducing drastically.
It may augur well for developing countries led by China that absorbed over half of the FDI inflows; however, the bad news is that inflows to India fell off a cliff to $25 billion in 2010 and even less this year. On the whole, FDI to South Asia declined to $32 billion, reflecting a 31 per cent slide in inflows to India and a 14 per cent drop in Pakistan, the two largest recipients of FDI in the subcontinent.
India is going in line with African nation. Foreign Direct Investment (FDI) flows to Nigeria declined by 29 percent in 2010 amidst regulatory concerns in the nation's oil industry. Similar wrongs have happened to India.
In contrast to what happened in 2008, India was top most destinations for foreign investment and there were so much hope. Reports on September 24, 2008 declared India as the most promising destination for foreign direct investment in the medium-to-long term. With this India has left behind China after eighteen years of opening up its economy. Wrong policies can make difference in just few years?
In comparison to 1990-2000 session, the years 2004-2007 had been very profitable for India (Thanks to NDA progressive policies for many years) as far as the inflows and outflows of foreign direct investment is concerned, claimed the report. From an average annual inflow of $1,705 billion in 1990-2000 sessions, it reached a whopping $22,950 billion in 2007 (India shining was real). Today when we talk about $25billion, it hurts the sentiments of India and will hurt the growth of Indians. Indian will have to remain developing for one more generation.
The WIR correctly attributes the decline in overseas investment to delays in approvals of large projects (thanks to environmental minister Shri Jairam Ramesh and activists like Sunita Narayan) and worries about macroeconomic factors like inflation (due to employment guarantee scheme, Food security Bill and other social schemes of government which has helped in increasing corruption to highest level).
The Economics Times in its editorial writes that these concerns need to be addressed with the seriousness they deserve. However I am surprise to see everyday front page of news papers focus on some or other trivial issues. Our news papers never concentrate on right issues.
Ultimately, it is the government responsibility to frame policies and take decisions. The government should come up with a policy framework that is receptive to FDI, instead of tying up investments worth billions of dollars in coils of red tape.
New Delhi must also break out of the policy paralysis that has gripped it. Just talking up sentiments is not enough; the government has to prove that it is capable of action by doing things. The inaction of government has been evident in almost all the leaders or ministers activities. They can only be prompt when they have to remove Ramdev from Ramlila ground otherwise they are entangled in coalition dharma.
From my point of view and as written in The Economic Times, there's plenty to be done.
1. One, Land acquisition is a very tricky issue. It is like Kashmir problems. Our leaders should not be allowed to played road politics on this serious issue. Government has to come up with a progressive policy on land acquisition that gives everybody whose livelihood depends on land a continuing stake in its development. It has to free up urban land, now made artificially scarce by large government holdings and pointless land-use rules. This scarcity pushes up the capital and working costs of building infrastructure. The way Rahul Gandhi is doing dharna and march is exaggerating the problems of land acquisition for everyone. It will hurt investments in the country for futuristic projects.
2. Two, it has to show that India welcomes foreign investment. I remember when I raised the question to Minister Jyotimaya Schindia in one of the conference, I find that many of leaders are just not aware about the present data and not conscious about statistics, how can they talk policies? But if they should do, one step forward would be to allow FDI in multi-brand retail. This will bring in financial capital and new technologies for storage and transport, and also contain inflation. It also needs to adopt a policy which says that FDI is welcome in all sectors.
3. Three, environmental clearances should come quickly. On the name of environmental clearance, we have hurt the mining industry, we have attacked on housing industry, we are slowing urbanization which may be the need of hour, and we are doing many wrongs. Environment should not come on the way of development. Poverty can then only be eradicated from this land.
4. Four, rules should be eased to make it easy for foreign investors to do business in India. Bringing a system to start a company in 1 day could be welcome move. That must be started soon and similar action need to be taken in other government clearance including passport office, driving license etc.
5. And finally, the government should ensure a stable tax environment with low rates. Every time some or other governor from RBI calls a press conference and announces the interest increase. This is not the way economy should be managed.
I do not know how many of our educated class know about this brutal facts, FDI is reducing drastically for last few years especially since UPA II. I do not know if Pranab Mukherjee or P C Chidambaram ever talks about this. It is very easy to fool Indians intelligentsia and that is what our leaders do it very nicely. Indian media also keep its eyes close on real issues.
India's ranking on FDI inflows has slipped to 14th in the world from 8th place last year and 2nd in 2008. With its huge economic potential, there's only one reason why India languishes at number 14 out of the 20 top destinations for investors: poor governance, policy paralysis and shortsightedness.
That has to end.
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