An Economic Paradigm Reminiscent of our Licence Raj

Livemint     27th July 2020     Save    

Context: On a closer analysis of the recent series of big-tick=et foreign investments, fall short of actually solving the problems and seems detrimental to the business competition in India. 

Critique of foreign investments: 

  • Not much investment: As compared to the previous year’s FDI figures ($50 billion), current investments are just $27.7 billion.
    • Spread out investment: Google’s investment of $10 billion, is to be delivered in tranches over the next 5-7 years.
    • Failed promises in the past: 
      • In 2017, only about 10% of the funds promised in the various Memoranda of Understanding (MOUs) signed materialized. In 2019, that ratio fell to less than 1%.
      • Taiwanese high-tech giant Foxconn had promised a $1 billion investment.
    • Investments providing ‘jobless’ growth
      • About 99% of the said investments would be in the Information Technology (IT) and Business Process Management (BPM) sectors 
      • The quantum of jobs added would be minuscule 0.05% of the total workforce. Last fiscal year, the IT and BPM sectors added about 200,000 new jobs.
      • By contrast, recent large investments in China have been much more diversified across sectors and more conducive to employment creation there.
  • Concentrated investments: 
    • 63% of the announced investments are in a single business, Reliance Jio’s Platform.
    • This reduced business competition, impacting productivity, and high-quality growth.
    • This might lead to crony capitalism.
  • No investments in manufacturing: That is where high productivity and plentiful jobs are created.
    • A major manufacturing hub for exports remains a pipe dream. 
    • Substandard productivity: India’s much-touted success as the world’s largest producer of personal protective equipment (PPE) has failed to generate noteworthy export sales