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Onset of Foreign Investment in India

Onset of Foreign Investment in India

By Kanika Gupta

Edited by Madhavi Roy, Senior Editor, The Indian Economist

The victory of the Bhartiya Janata Party in the General Elections of 2014 has been one of the most prominent political events of recent times. The newly sworn in Prime Minister, Mr. Narendra Modi, is being touted as the knight-in-shining-armour, who promises to rescue the Indian economy from its downtrodden state. A self-professed workaholic, Mr. Modi has pledged to revive the Indian economy after a lengthened period of economic deterioration through creating confidence in the world about the huge investment possibility in India.

Beginning September 2014, Japan announced a two-fold increase in its public and private investment in India to about 34-billion USD over the next five years. India’s bullet train project, cleaning up river Ganga and setting up smart cities are some of the avenues towards which said the Japanese investment will be channelled. This declaration was made by the Japanese PM whilst Modi’s 5-day visit to Tokyo. Within a week followed the visit of the Chinese president Xi Jinping, who made it clear that China intends to invest over 100 billion USD over the next 5 years, setting up Industrial parks, ports, manufacturing projects and world class infrastructure in the country. Even the likes of Donald Trump, the American real-estate mogul, have shown a keen interest in making “substantive investments” in the Indian economy, since the advent of Mr. Modi as PM.

A majority of such a surge of inflows of foreign capital has been attributed by economic and political think-tanks to Modi’s business-friendly demeanour and largely outspoken intentions to do away with ‘red-tapism’. After decades of avoidance, international investors are finally keeping an eye out for investment avenues in the Indian economy, which is the need of the hour.

Time and again, Modi has reiterated the significance of FDI for accelerating economic growth in India. A surge of foreign capital will not only bridge the gap between the capital available and the capital required, but it will also bring about “technology transfer”. The foreign firms that invest through FDI are usually highly productive and economical, and therefore, bring in cutting edge technology and production methods, which furthermore, results in an improvement in supply chains, enhanced marketing, improvement in customer satisfaction, among other things. As Mr. Modi puts it in his unique style, “FDI means First Develop India for me.”

However, the road to making FDI a top priority isn’t one without hurdles. There exists a conflict of opinions regarding the total liberalisation of the retail sector as it would mean cut-throat competition for the unorganised sector and displacement of the traditional ‘mom-and-pop’ stores in localities, eventually, leading to larger unemployment. Therefore, there exists a trade-off between rapid economic growth and threat of displacement of smaller unorganised retailers who dominate the Indian retail sector today. These challenges, however, must be overcome by Modi and his government to deliver economic prosperity to the nation. As an Indian citizen and a voter, I am extremely pleased to finally encounter a political leader who believes in translating words to actions. A ferocious leader and a man of authority, Modi has made the nation optimistic about its future. Are happy days really here? Only time will tell.

Kanika Gupta is a second year student of Commerce at Lady Shri Ram College, New Delhi. As a core team member at Enactus LSR, she firmlybelieves in social entrepreneurship as a means to bring about a positive change in the world. She is an ardent reader and writer, and has a penchant for expressing herself through paper and pen. Forming an eclectic mix, her subjects of interest include investment management, philosophy, international affairs and modern & contemporary poetry, among others. An adventure seeker at heart, she relishes new experiences and explorations.

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