The decision to further liberalise the FDI and its impact on Indian ecponomy

Well in my opinion India is struggling with poor saving-investment ratio as its one-fourth people lives below poverty line and the middle class at large spend more of their income in consumption. In such case FDI is much needed to push the economy from low level equilibrium trap. However Modi’s policy to further liberalise FDI, no doubt will appreciate foreign investors in the country as India remains the favorite destination for the investment in global crisis. But more than just investment India expects new and innovative technologies especially in defence sector from the foreign companies.

However my concern is more about the future. When these multi giants companies will get establish, they might force domestic production houses to exit as they will be more technologically advance and cost efficient. So to combat such situation India policy makers have to keep an eagle eye over the market functioning. They must have to formulate policies by which they can use their technologies to develop domestic industries rather than to get used. FDI in India can be means to achieve economic progress of the country but itself is not the end and neither the ultimate solution for all the economic problems.

Modi government decision on FDI should also not seen by isolating political opportunities. The declaration on FDI is sudden and came at a time when RBI governor Raghuram Rajan announces his decision to not to continue his tenure as RBI Chairperson. And at the same time government was facing enough criticism from all over the masses on harassing Mr. Rajan, so it may be a political tactics to divert the issue as pointed by Congress leader Jairam Ramesh. However this decision may be to support exchange as there were speculations that share market will drop by his announcement.

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