The government, however, is unwilling to extend them special favours.
Last week, hordes of non-resident Indians arrived in capital New Delhi. Affiliated to various NRI associations, they had a one-point mission: to complain about the neglect of NRI interests by the government. Among their demands: scrapping the Foreign Exchange Regulation Act (FERA) and granting them dual citizenship.
The rationale for these conditions: non-resident investment accounts for 25 to 30 per cent of foreign direct investment in India, the single-biggest chunk.
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Any long-term observer of foreign investment could have told them that they were wasting their time. The conditions they set at the meetings were not new. Nor was the government likely to change its attitude towards investment from expatriate Indians.
The official line on NRIs was clear from the deputy chairman of the Planning Commission, Madhu Dandavates speech during one of the meetings. Dandavate pointed out that during the balance of payments crisis in 1992, it was the NRIs whose mass-scale withdrawals partly precipitated the problem in July and August that year.
During a similar crisis in China, Dandavate said, overseas Chinese investors went out of their way to pump in money. As a result, today, investment from the overseas Chinese account for more than 60 per cent of Chinas foreign reserves.
On the whole, the government and NRIs have a love-hate relationship. The government badly needs foreign investment so it cant entirely ignore what the NRIs contribute. Especially because, as Dandavate pointed out, NRI investment is desirable as it comes without harsh conditionalities and does not interfere with the priorities of the country.
The problem perhaps begins with the expectations on either side. There are an estimated 18 million NRIs and 180 NRI associations scattered across the globe. After following lucrative careers abroad it is assumed that these successful people would want to do something more for India.
NRIs are ready to contribute but only if their interest is reciprocated with special concessions. And the government has made few moves on this score. Says an NRI investment consultant, The government set up the office of the NRI commissioner a year ago but vested no powers with him. As a result, this office functions more like a post-office than an investment promotion organisation.
For the rest, the litany of complaints are no different from those of other foreign investors. Bhishma Narain Singh, president of the NRI Welfare Society of India says NRIs face some problems when they come to the country and have to face bureaucratic red-tape.
G A Charan Reddy, earlier an NRI from the US and now a member of Parliament, says there are higher returns in other markets that make investments in the country unattractive in comparison. Reddy is setting up a power project in Andhra Pradesh with four other NRIs and says nobody gives the NRIs a patient listening. They have to run around just to collect information, Reddy complains.
That is why, unlike other foreign investors, NRIs prefer to put their money in banking and portfolio investments rather than in the industrial and infrastructure ventures that the government wants. I dont want to burn my fingers, points out Mahindra Singh Sethi from Japan.
The industry ministry has granted approvals to NRI investments worth Rs 44,685.40 million between 1991 and September 1996 while total NRI inflows (which includes proposals cleared before 1991) have been Rs 51,814.5 million. This is out of the total FDI inflow of Rs 1,81,504.9 million.
Compare this with the growth in foreign currency flows into the non-resident dollar deposit account. During April-September 1996, the non resident dollar deposit accounts touched $ 2.1 billion for the first six months of the current financial year compared with a net accretion of $ 2.7 billion in 1995-96. This spurt has occurred on the non repatriable foreign currency deposit front.
In 1995-96, $ 1.2 billion was remitted through the non-resident non-repatriable rupee deposit [NR(NR)RD] scheme; inward flows in April-September 1996 had already touched $ 1.3 billion.
The government is now considering the possibility of according the status of foreign direct investments (FDI) to such remittances because, unlike other foreign currency remittances for which interest is paid in dollars, withdrawals on the [NR(NR)RD]accounts are settled in rupees. This has the advantage of not adding to the governments overall foreign debt burden.
This, however, is unlikely to make an appreciable change in the status of NRI investments in India. Are there solutions to this long-standing issue? The Chinese experience could provide some clues.