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S. Balakrishnan

It is high time we look at the potential for FDI in grossly neglected sectors such as agriculture and food processing for world markets.

FOREIGN investment and investors must be made to feel welcome, says a senior bureaucrat ensconced in a number of policy-making bodies of the Government of India.

Only then will we attract funds on a scale comparable to China. Indeed, for many sections of the polity and bureaucracy, there is no hope of progress unless foreign investment shows a quantum jump.

The doors to money from abroad have been open for long in the Asian tiger countries and those on their periphery — Thailand, Indonesia, the Philippines, Malaysia, etc. China is a relative newcomer. Such investments have been motivated mainly by cheaper costs. In effect, these countries are production locations of MNCs for exports to the affluent West.

In the case of China, its exports have been helped in no small measure by its entrepreneurial Hong Kong and Taiwanese Chinese and its MFN status with the US (despite not being a member of the WTO).

Our Government need look no farther than the export basket of the Asia-Pacific countries and China, which ranges from low-tech (garments) to high-tech (computer chips) products to understand the missed opportunities. China is running huge BoP surpluses with the US and American concerns are still only murmurs — a tribute to the vastly greater leverage that China has on US politics and trade policy.

We, in contrast, want foreigners to own and operate low-tech infrastructure — power, roads, ports, etc — where there is no proprietary technology or privileged access to markets involved. What value addition there is for the economy in foreign ownership and management of these sectors where our expertise is abundant is a mystery.

There seems to be little economic and financial rationale either — we have sufficient idle capacity in industry, ample forex reserves and no danger of inflation if we make big investments in infrastructure ourselves.

What is happening, therefore, is giveaways — the mollycoddling of foreign and private investment is reaching absurd proportions with assured returns of 30 per cent to 40 per cent on investment not being uncommon.

On a sliver of equity — foreign or Indian — these projects are being financed almost entirely by Indian FIs and banks. They guarantee even foreign loans with the result that the worst affected by the failure of, for instance, the Enron power project are home-grown lenders!

It is high time we look at the potential for FDI in grossly neglected sectors such as agriculture and food processing for world markets. India is rich in its quantum and diversity of agricultural resources. We need foreign technology and branding to create value addition.

These could be 100 per cent foreign-owned — preferably with foreign capital, but also with support funding from domestic FIs/banks and capital markets, if need be.

Other sectors as these that establish India in the markets of the West must be identified. An example which comes to mind is industrial and consumer electronics — witness the success of Taiwanese and South Korean companies in these sectors in the fiercely competitive US market.

We are not even aware of or sensitive to shaping our policies to enter such lucrative segments of world exports, despite our technical and managerial manpower being equal to the best in the world.

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