4) Reply to Ulhas: Thu, 22 Jan 2004 From: uvj at vsnl.com replying to Alexandre Fenelon who asked: (Hi, Ulhas, how is FDI as % of India nominal GDP???) Ulhas: See the article "Why FDI bypasses India". Though it's written from a liberal perspective, provides some useful data. India has received about $30 bn in the nineties (1991-2000), FDI $20 bn and portfolio investment $10bn. This would be less than 1% of India's GDP. Anecdotal evidence and media speculation suggests that foreign portfolio investment is in reality Indian owned capital returning to India for investment in stockmarkets (money stashed away by Indian residents in Swiss banks, Cayman Islands etc.) Interestingly Virgin Islands said to be the second largest source of FDI in China, Hongkong being the largest.:-) If you consider large corporates listed on Indian bourses, you get somewhat different picture. I found that about 20-25% of the total market capitalisation of large listed corporates belongs to listed MNCs, when I checked couple of years ago. Ulhas now goes on to cite an article from The Economic Times
Thursday Oct 04 2001; by Shankar Acharya ; this starts as follows:
SINCE almost everyone is talking and writing about the consequences of September 11, let me discuss something else for a change - foreign direct investment FDI) into India. Successive governments since 1991 have sought to increase FDI. How have we fared and why?
HK: But surely Ulhas, this is a rather narrow viewpoint? Firstly, the author himself points out that successive governments have failed to increase FDI
& have been trying. Secondly, it ignores the pressures being brought to bear now. But: probably best to see my three rejoinder points below. i) Firstly, the Indian Government has taken some rather drastic steps to completely open the doors ot FDI. A couple of citations should suffice to make this all abundantly clear: http://news.tradingcharts.com/futures/8/1/52527818.html
India eases foreign investment in private banking, oil sectors.
NEW DELHI, Jan 15, 2004 (AP WorldStream via COMTEX) -- India's government said Thursday it had decided to allow greater foreign investment in the country's private banking and oil sectors - a move that is expected to boost the size of both industries and raise support for the ruling party ahead of national elections. .. Prime Minister Atal Bihari Vajpayee's Cabinet approved raising the ceiling on foreign equity in banks to 74 percent from 49 percent and allow full ownership in oil marketing and exploration firms from the existing 74 percent, Dow Jones Newswires reported. &..Foreign investment in the private banking sector will be subject to certain conditions, including restricting overseas investors who have holdings in the insurance industry to only be able to hold 26 percent of private banks. Ashvin Parekh, executive director of the Deloitte Touche India Pvt Ltd., said the government's decision could triple the size of the local banking industry over the next three to four years. Thirty-four foreign banks currently operate in India. The initiatives are being viewed as a bid to impress voters ahead of national elections in March-April. Vajpayee's Hindu Nationalist Bharatiya Janata Party is keen to cash in on an expected 7 percent economic growth, a renewed peace effort with longtime nuclear rival Pakistan, and success in recent elections in three states at the expense of the main opposition Congress party. 1ii) at: http://www.siliconindia.com/shownewsdata.asp?newsno=19752&newscat=Business
India approves foreign investment worth Rs.1.68 B IANS Tuesday, June 10, 2003 The Indian government has cleared 18 foreign direct investment proposals worth Rs.1.68 billion, covering a wide spectrum of industrial sectors such as hotels and health tourism, design, engineering and finance. NEW DELHI: The government approved the U.S.-based Monsanto Company's proposal to increase its stake in the Indian subsidiary that manufactures agrochemicals from 72.15 percent to 75 percent with a fresh investment of Rs.188.8 million.
The proposal of U.S.-based Jeffreys for equity participation with an investment of Rs.73.9 million in hotel and health tourism services provider Loka Resorts Private Ltd. was also approved.
Bangkok Seeds Industry's proposal to invest Rs.50 million in a wholly owned subsidiary for production and sale of high quality corn seeds has also been approved.
1iii) The Hindu in 2002: http://www.hinduonnet.com/thehindu/thscrip/print.pl?file=2002093000020200.htm&date=2002/09/30/&prd=biz&
IN AUGUST 2001, the Planning Commission constituted a Steering Committee on Foreign Direct Investment (FDI), which had 12 members and was headed by N. K. Singh, Member, Planning Commission. The other members were drawn from various Central and State governments, the Reserve Bank of India and industry associations. The terms of reference of the committee included&&&&&.. Consider the enactment of a Foreign Investment Promotion Law that incorporates and integrates aspects relevant to promotion of FDI. The Department of Industrial Policy and Promotion should administer this law as against the present administration of the Foreign Exchange Management Act (FEMA) by the Directorate of Enforcement. This will be in line with the approach that the activity of encouraging FDI should be a promotional one rather than a regulatory one. &&&&&&. &&..* Change Government's Rules of Business to empower Foreign Investment Implementation Authority (FIIA) to expedite the processing of administrative and policy approvals. &&&&&..* The committee has also recommended that a number of exit barriers to FDI investors should be removed. This includes sale of shares by one foreigner to another foreigner, sale from non-resident to resident, the rule that premium on publicly listed share price cannot exceed 25 per cent and rules regarding minimum sale price in the case of unlisted companies.
2) The poor showing previously reflected the legacy of the closed door
regimes that were explicitly attempting a policy of import substitution . A sea-change occurred as the regimes in India changed. This is stated clearly by all sources irrespective of their political bent. Thus Alliance ML in its fairly lengthy analyses of Indian development (or lack thereof) have pointed this out. Unsurprising? What about more respectable sources however?
Investment in India - Foreign Investment - Openness to Foreign Investment http://finance.indiamart.com/investment_in_india/foreign_investment.html Post-independence scenario India's post-independence economic policy combined a vigorous private sector with state planning and control, treating foreign investment as a necessary evil. Prior to 1991, foreign firms were allowed to enter the Indian market only if they possessed technology unavailable in India. Almost every aspect of production and marketing was tightly controlled, and many of the foreign companies that came to India eventually abandoned their projects. & Hassles earlier Prior to 1991, foreign equity participation was limited to 40 percent, and foreign investors were saddled by numerous operating constraints. Foreign equity investments in excess of 51 percent, or those which fall outside the specified "high priority" areas, must be approved by the Foreign Investment Promotion Board (FIPB) and approved by a Cabinet Committee. Constraints: too many The government on occasion has denied requests for a foreign equity stake exceeding 51 percent. Non-resident Indians (NRI's) and Overseas Corporate Bodies (firms with NRI majority ownership) may hold 100 percent ownership in all industries except those reserved for the public sector.
3) Finally on this score, the World Bank did a very lengthy analysis of why some countries have barriers to FDI & what they consist of. The answers are not too surprising to anyone familiar with the Babu corruption in India & the nightmares of even trying to get a domestic telephone installed. Anyway that abstract & the web-link is at: Jacques Morisset, and Olivier Lumenga Neso: Administrative Barriers to Foreign Investment in Developing Countries
at:
http://econ.worldbank.org/view.php?type=5&id=15291
HK: In summary of these points, I think the whole question of who is a comprador and for whom? or Who is a national capitalist & how sturdy a fighter is she/.he? are NOT redundant questions redolent only of the 1930s debates in the Comintern. Finally Ulhas, it should be made clear if you like the author of the article cited, would like India to emulate little Sri Lankas
sell-off to foreign capital? ___________________________END________BACK TO THE SALT-MINES__