Alien Concerns

So the aim really should be to promote foreign direct investment and public ownership of shares in a non-discretionary manner. The latter is best achieved by providing tax incentives to companies to become widely held. A lower rate of income tax for widely held companies, which used to prevail earlier, can be brought back along with expanding the scope of automatic approval of foreign investment.

The issue of hundred per cent foreign-owned companies has been made unnecessarily emotive, mainly because of some Indian businessmen's desire to retain or acquire joint venture partner roles that would otherwise be unavailable. If hundred per cent ownership of a key subsidiary merely increases the comfort level of a foreign investor, then that should not be frowned upon. On the other hand, if such a subsidiary tends to devalue the worth of an existing company in which the shareholding public has a stake, it can be argued that that needs to be discouraged too. But the important point is that the market will provide its own correctives (disillusioned shareholders can be pretty ruthless in their comment on managements), and policy-makers need not lose sleep over the issue. Just as domestic companies can set up wholly-owned subsidiaries, others can too, within the broad investment rules that apply.