Jayalalithaa opposes easing of FDI norms

The Central Government should frame policies to promote exports, curb the import of non-essential items and prevent the speculation in foreign exchange market to strengthen the rupee rather than increase the foreign direct investment limit, according to the Tamil Nadu Chief Minister, J. Jayalalithaa.

Relaxing FDI norms cannot address the macro-economic imbalances. More policy initiatives are needed to promote exports and address the current account deficit. The Government has also not been able to improve the infrastructure and investor environment, she said in a statement.

Rupee depreciation

A depreciating rupee contributes to inflation and makes difficult for the people hit by frequent increases in the prices of fuel.

Economic policies of the Government are to be blamed for the rupee hitting unprecedented lows against the US dollar in recent months, she said.

Foreign investments

Reacting to the recent announcements on relaxing the FDI limit in a range of sectors and similar proposals in the pipeline, she said easing foreign investments in telecom, plantation, defence and retail can have an adverse impact on people, small businesses and pose a threat to national security.

The FDI cap of 74 per cent in telecom sector has been removed to allow 100 per cent investment. Allowing the communication network in foreign hands presents serious security and privacy issues, she said.

Plantation sector

In the plantation sector and single-brand retail, foreign investments have been allowed freely up to 49 per cent through the automatic route and 100 per cent with FIPB clearance.

Small plantations and workers could be hit by large players, she said. State Governments will have to be consulted before clearing 100 per cent investments, the Chief Minister said.

Defence, insurance sectors

In the defence sector, the announcement lacks clarity apart from raising concerns of security. The limit is unchanged at 26 per cent but the Cabinet Committee on Security has said that it may consider higher investment levels for latest technology.

In the insurance sector, the public sector undertakings which bear the social obligations have been handicapped compared with private operators. The Insurance Law (Amendment) Bill, 2008, (which provides for increased foreign investments in insurance companies) is still pending in Parliament.

The Centre appears to be more concerned about foreign interests and external rating agencies which are frequently threatening to lower the sovereign rating, she said.

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