With reference to the editorial, "Not a great leap forward" (June 22), opening the doors to foreign direct investment (FDI) in nine key sectors, which at present account for only 11 per cent of the total FDI in India, is a welcome step.
As the decision covers high investment and some sensitive industries such as defence and pharmaceuticals, the permission should come with some conditions. However, as pointed out in the editorial, the imposition of terms such as state-of-the-art, cutting-edge technology are too abstract and subject to interpretation. This opens the door for corruption.
Some other aspects of the policy are worth considering. While liberalisation of investment norms might generate interest among foreign direct investors, it is the expected return on investment that would convert it into sustained action.
From this point of view, steps to generate consumer demand and remove hurdles in the way of ease of doing business should be attended to expeditiously, particularly in those sectors where India ranks low, such as contract enforcement, anti-bribery environment, land and power availability and labor law reforms.
FDIs are guided by quick and enduring financial results. Where the gestation period is high, the risk of divestment is high, too. So, even as the drive for foreign investment generates hype, some suitable fallback measures in critical sectors such as defence should be thought of in case flight of capital takes place.
Y G Chouksey, Pune
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