Posts tagged ‘privatisation’

My Questions on FDI


Following are some questions that I had asked to Vivean Fernandes in the chat organised by CNN-IBN on its website IBNlive.in.com

http://ibnlive.in.com/chat/economic-policy-editor-cnbctv18/has-manmohan-singh-been-a-weak-prime-minister/1193.html

Q. When FDI comes in they buy rupee and it goes up. So far so good. But what will happen when these companies will cash in profits and take dollar out. What happened to 1997 asian tigers crisis. Do you not think currency will eventually be doomed because of this decision of FDI? Specially because we know this money will be used for consumption and not infrastructure development Asked by: Amitabh Pandey

Ans by Vivean: Foreign discount stores will source locally (so that the products they sell can be affordable). For that, they will have to upgrade the quality of locally-produced stuff. Look at the design and workmanship of Ikea products, and look at the quality of our own furniture. When Ikea comes to India it will help its suppliers to produce higher quality goods. These goods will then also have a chance to find export markets. So by allowing foreign discount stores to sell here, we will be able to sell more abroad! For an analogy, just look at the automobile ancillary sector.

Unanswered follow up Question:  If that had been the case, our exports by now after 20 yrs would have surpassed our imports? Proof the pudding lies in its eating, isn’t it? But on the contrary, we are still looking for debt to finance our imports and our trade deficit is exponentially growing. Regarding technology, how much manufacturing growth has happened due to import of technology as a result of FDI? Instead, unlike China, its only services where bulk of our growth belongs to. In fact the only way we got technology was when we invested in research e.g., cryogenic engine, our space and missile programs etc. And on the automobile and ancillary growth, the consumption has been propped up by easy money policies of government where inflow of new money (to a certain section of society) was actually performing a theft on the purchasing power of real wealth generators (read farmers, workers etc) of the economy.

 

Q. 20 yrs of PMs policy and we are in greater debt, exponentially growing trade deficits, BOP crisis again staring us and lower currency value leaving less room for government intervention through QE / stimulus? Do you not think we have been spending debt money on consumption? And this is a failure of PM and his economic policy? Asked by: AP

Ans by Vivean: 20 years of Manmohanomics have also given us 6 percent to 9 percent annual economic growth rate, the fastest reduction in poverty in our history, well stocked shops, the possibility of owning a house well before one’s retirement and also hope for our youngsters. We need more of Manmohanomics and not less.

Unanswered questions:

Q. 20 years of Manmohanomics have also given us 6 percent to 9 percent annual GDP growth rate but that is propped up by debt. 20 yrs of manmohanomics has given us record number of farmer suicides, Forex equals to external debt, exponentially growing trade deficits, higher inflation, BOP crisis staring us, greater rich and poor divide and greater disparity in the economy. Don’t you think your argument of GDP growth is meaningless with all this and 90% debt to GDP ratio? Does GDP take into account a country’s debt? If I get a natural calamity, will the money I spent for rebuilding not show the GDP up (“broken window fallacy”)?

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