The Hindu Business Line : FDI in India

The opening observation in the editorial `Right notes' (Business Line, December 22) that India's development strategy in the early 1990s shifted from self-reliance to pursuing FDI through direct and portfolio investments, reveals the obvious and hides underlying realities. The first Prime Minister, Jawaharlal Nehru, kept the door open for foreign technology and investment. But developed countries spurned such opportunities because they perceived more profit in trade and investment among themselves.

The situation changed by the end of the 1980s with the saturation of markets of advanced capitalist countries, triggering the need for expansion towards markets elsewhere in the world. Thus, the change of gear was done by the business world of rich countries. Their governments and international financial institutions facilitated the change of gear. The FIIs came later lifting the stock market to unprecedented levels during 1992 .

The suggestion in the editorial ends on a right note of caution that needs to be put in place to protect the stock market and ensure its orderly functioning.

K.V.A. Iyer

Kochi

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