Foreign investment will help economy grow
North Block's approval of two major foreign investment projects earlier this week is significant on two counts — first, it paves the way for a much-needed fund transfusion into the beleaguered Indian economy, and second, it reiterates the potential of this country to emerge as the world's priority investment destination if only the Government allowed an enabling set of market regulations. On Monday, the Foreign Investment Promotion Board cleared retail giant Tesco's plans to enter the multi-brand retail market, and also accepted Vodafone Plc's proposal to take full ownership of its Indian arm. The plans will now be reviewed by the Union Cabinet, and if cleared (as widely expected), they will bring in a surge of foreign funds into the economy. Tesco will make an initial investment of `680 crore in partnership with Trent, which is the retail arm of the Tata group. The two already have an established relationship as Tesco has been supplying much of the goods that are sold at Trent's 16 supermarkets across the country since 2008. Now, Tesco will acquire a 50 per cent stake in Trent to become the first foreign retailer to directly sell its wares to Indian consumers in the multi-brand retail market. As for Vodafone Plc, the cellular service provider will invest more than a `10,000 crore to buy out its minority partners, Mr Ajay Piramal of Piramal Enterprises ltd (10.97 per cent share) and Analjit Singh of Max India ltd (24.65 per cent), and gain full control of Vodafone India ltd, where it already has a 64 per cent stake. Both investments are expected to go some distance in rejuvenating the Indian economy which registered its lowest growth rate in a decade this past fiscal year. It should also help bridge the country's ever-widening current account deficit and finally, signal to other foreign investors that India is open for business.
Colossal fiscal mismanagement, widespread corruption and stifling market regulations has meant that, under the aegis of the Congress-led UPA regime, foreign investments in the Indian market has all but dried up in the last few years. Earlier, the Government had wanted us to believe that this slump was almost entirely due to the global financial recession of 2007-2008 but now even the Centre has been forced to acknowledge that this hardly a half-truth even. Pushed against the wall, the Government opened up the country's lucrative retail and telecommunications market to foreign investment. Initially, international investors showed little interest in India because they had almost no confidence in the UPA Government. Also, in the multi-brand retail sector, foreign retailers were unwilling to make the mandatory investments in back-end infrastructure or follow the 30 per cent local procurement norms. These rules were relaxed in August 2013. Yet, the French major Carrefour stayed away, while the American giant Walmart walked out of the Indian market in October 2013 when it broke its six-year long association with the Bharti Group — both clearly wary of a regime, struck by policy paralysis.