FDI- Good or Bad?

Recently, we heard news of SoftBank keening to invest $2-3 billion in Reliance Jio. Softbank already has huge stake in India businesses. Naming some – Ola, Snapdeal, Paytm, Oyo and many more. Does our Make in India have a clause where we grow our businesses and sell those to these foreign players? Or are we incompetent to run our businesses without these foreign intrusions? Do we really need to rely on FDI for our economy needs?

I believe No, we should not over rely on FDI. Here are my logical arguments:

1. Losing Control from Our Hand:

Once they have more than 50% stake in our businesses, they can dictate their own policies. Not just the businesses, they can target Indian Politics as well. “KGB: The Inside Story of its Foreign Operations from Lenin to Gorbachev” book by Christopher Andrew and Oleg Gordievsky, explains how they used to control Indian Government through money influence.

2. Influencing Indian Market:

First, we must understand the nature of investors who are bringing FDI in developing countries like India. These institutions and persons like Hedge funds, Pension Funds of USA, SoftBank are very wealthy and want large returns on their investments because western world is passing through a near-zero rate regime. They are always looking for attractive places for investment. Their only concern is profit. They are not concerned about providing employment or development of country. So, suppose if they see that Indonesia is looking more promising that India now due to some quarterly results or some announcement by Indonesian or Indian government, they will pull all their money out of India and invest it in Indonesia. This will in turn put pressure on Rupee and hurt our Current account deficit and lead to runaway inflation. These investors are also fickle minded. They react very vigorously to any news like Federal Reserve raising rates, bad monsoon in India etc. So over reliance on them will make our economy very unpredictable and more exposed to dangers of world market.

3. FDI leading to regional inequalities:

Generally, you will find these traits that FDI goes to already rich states like Maharashtra, Delhi, Gujarat, Tamil Nadu. So, all the benefits of FDI gets accrued to these states only while states like Odisha, Jharkhand, Bihar lag. This is very dangerous as it exacerbates already humongous regional economic differences in India.

There are also other problems like Tax Evasion by FDIs, Lobbying and their influence on our politics and foreign policy.

Thus, government must keep a check to the extent FDI can invest in any business and to hold our grounds, the ownership should never be exercised by any foreign player.