Prime Minister Narendra Modi has launched the ambitious “Make in India” project to deliver growth and create job opportunities which he had promised during the 2014 Lok Sabha election campaigns. The new government appears to be committed to carry out the structural reforms and has already taken certain steps.
To begin with, labour reforms have been announced by the prime minister and the long pending tax reforms are expected to be tabled in the next session of the Parliament. Considering the economic scenario of the country, in principle we should agree that we need the foreign investment to drive the growth rate, but trade oriented Foreign Direct Investment (FDI) should be encouraged to either result into increase in exports or decrease in imports. Now, the leadership has given a message to the world that India has replaced the red-tapism with red carpet and everyone is invited to take part in the constructive & sustainable development.
The new government appears to be committed to carry out the structural reforms and has already taken certain steps. Labour reforms have been announced by the prime minister and the long pending tax reforms are expected to be tabled in the next session of the Parliament.
As a measure, the government is taking all the necessary steps to win the investor’s confidence, and the investors are urged to stop thinking of India as a market only and start considering us as a production hub which is having advantage over other economies in terms of skilled and productive labour. Growth of manufacturing sector will not only increase the pace of industrialisation but it will also help increase our share in world export market.
Role of Foreign Investment
Foreign investment is also required to cover the trade deficit. In our context gross domestic savings were 30.1 per cent of the GDP in FY 12-13 as compared to 33.7 per cent for FY 09-10 and our balance of trade situation is unfavorable.
A dollar received by way of FDI is always equivalent to a dollar only and nothing more than this, unless it is channelised in those sectors which provide boost to the economy. We can learn from the experience of China that trade oriented FDI should be encouraged to result into either increase in exports or decrease in imports. Such a policy will not only bridge the gap between saving and investment but will also help to manage the trade imbalance.
Foreign investment in industries like consumer goods is not going to serve the purpose set by the government because such kind of ventures are purely based on commercial considerations only, without any regard to the needs of our economy. An investor who is looking at India as a market only will not help us achieve the sustainable growth we’re aiming at.
The ‘Make in India’ vision thus is not meant for foreign investors only but it’s also a call to the industrialists. Over dependence on FDI will create economic imperialism. It should be construed as a message to the entire world that India has replaced red-tapism with red carpet and that everyone is invited to take part in India’s constructive and sustainable development.
CA Shshank Saurav (The writer is a Chartered Accountant)