Backing the National Democratic Alliance Government's decision to open up some of the sectors, including defence, for 100 percent Foreign Direct Investment (FDI), leading defence expert C. Uday Bhaskar on Monday said one clause here one clause there will not make any difference that India is seeking, and hence, there is a need to address the whole ecosystem that makes investment by a foreign entity conducive.
"The decision to allow 100 percent in FDI is welcome, because if India is to make any progress in 'Make in India' in the Defence Sector, then we will have to provide adequate incentives for manufacturers or people who are willing to invest capital in India. But, my reading as an analyst is at the end of the day, if foreign manufacturers X, Y or Z want to invest in India, they want the whole package, meaning the whole ecosystem of investment for a foreign entity to be conducive, which means apart from the financial ceiling, taxation laws, labour law, land acquisition, etc," Uday Bhaskar told ANI.
"I think what they have done now is to look at technology and they have used the word 'modern technology', which is important. They have also identified certain sectors within defence, including areas like small arms, which is all welcome," he said.
"I would say what Prime Minister Narendra Modi had said when he became Prime Minister that India is often seen abroad as country with red tape and promised that when he became Prime Minister, he would change red tape to red carpet, so far as an analyst I would say that the red carpet remains allusive, which is why many of the major manufacturers are still very hesitant and reluctant to invest in India for the long term. So, my advocacy is that address the whole ecosystem. One clause here, one clause there will not make a kind of difference that India is seeking," he added
Pointing out that this is not for the first time that the Government of India has made such a provision, he said during the UPA government - if you look at the procedures and rules that had been formulated - there was one clause, which said while they spoke about 49 percent as the ceiling, that in certain cases for the state of the art technologies 100 percent FDI would be allowed subject to case by case scrutiny.
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"To that extent, I would make the point that the 100 percent is not a very radical decision, it was there. What is the challenge to my mind again is that the government has to look at the ecosystem," said Uday Bhaskar.
When asked about the side effects of the 100 percent FDI, Uday Bhaskar said, "This debate has gone on for a very long time, but I would say that the kind of globalised economy that now we have, also if you look at the high technology, we have to take this plunge otherwise India would not be able to attract the kind of high technology it seeks and many of them are protected by the patents and IPR.
"So, unless you are able to get some people to come into India, I think, India's ability to absorb such technologies will also be limited. So, at this point, I would say that notwithstanding some anxieties in certain very critical sectors, we should be able to live with this challenge."
In a press statement issued here on Monday, the Prime Minister's Office (PMO) said, "The Union Government has radically liberalised the FDI regime today (Monday), with the objective of providing major impetus to employment and job creation in India."
"The decision was taken at a high-level meeting chaired by Prime Minister Narendra Modi today. This is the second major reform after the last radical changes announced in November 2015. Now, most of the sectors would be under automatic approval route, except a small negative list. With these changes, India is now the most open economy in the world for FDI," the PMO added.
