REFORMS IN PROCESS “FDI”: An Optimistic Approach

Posted on September 25, 2012 in Business and Economy

By Rahul Kumar:

Ever since the FDI in retail and Diesel price hike were proclaimed I’ve been trailing the news and debates concerning these reforms. And all I’ve perceived is that everyone had been targeting and criticizing the government and Prime Minister Dr. Manmohan Singh over these reforms. I’ve read not a single article which explains or praises these reforms, which I do agree came late for various reasons. First I’d like to start off by saying that we have to stop being pessimistic towards every decisions that the government takes.

I do agree that criticism is an impeccable part of society, it creates accountability and alertness within executives that they have to do what is right. However we should not follow pessimistic approach towards whatever government does. We should at least give a fair share of chance to them so that they can do what is necessary to bring prosperity and growth and hence before criticizing we should know about and put both pro’s and con’s to test. Now coming to the current topic of FDI and Diesel, all I’ve heard till now is vague and suspicious views towards these policies. Hence I decided to write why it could prove to be a boon for us and what precisely the government is thinking and wants to do by implementing these policies.

The article is addressed especially to those against these reforms. With FDI finally being introduced in retailing, foreign currency will flow in, which our country desperately needs today to bridge its BoT, and with foreign companies like Walmart bringing better infrastructure and facilities to India, the food and commodities lost in transaction due to lack of good means of transportation or due to lack of storage facilities will finally come to an end (this is a mandatory condition for bringing FDI that 50% of amount bought will have to be spent on betterment of infrastructure and transport facility).I guess the farmers and consumers do fulfil your eligibility criteria for being a so called “aam admi“; both these are going to benefit with this decision which finally PM has taken. Farmers would get right prices for their crops and consumers will finally get commodities at the right prices.

All this while, before these reforms, which you all are criticizing as a red herring, you were calling the PM an underachiever and were criticizing him for not doing enough and taking necessary steps to balance our falling economy, and now, when finally he’s taken these vital steps and done something right you all are questioning upon his knowledge over the economy. He’s the same person who saved our economy from the 1991 crises when our country had literally become a beggar as no one was ready to lend a penny to it. Finally the reforms, “LPG” was brought in by our then finance minister and current PM who you’ve been calling underachiever. Same questions were raised back then too when liberalization was initiated and FDI was introduced in manufacturing, everyone thought our manufacturers would not be able to compete with these foreign giants, but on the contrary, our manufacturers not only competed with them but created there firms/businesses as global giants themselves. I am sure this time too, the retailers no matter how big or how small would compete and emerge as better than ever before.

Let’s talk about the facts and figures. When the price hike of diesel and FDI policy was announced, the very next day rupee finally breached 54 mark and finally gained more than it had gained in months and the Sensex rose more than 400 points.

Now you all (who are criticizing these policies) would have an argument that how’d it help taming the inflation and help your so called “aam admi“. Let’s take this argument too; with subsidy on diesel reduced, the highly widened FISCAL DEFICIT would start getting bridged (subsidiary on diesel widen the fiscal deficit by 2,00,000 crore; with decreased subsidiary the gap would be bridged to an extent of 40,000 crore leaving it to 1,60,000 crore). Also with revenue expenditure being reduced, government can finally use funds for capital expenditures like infrastructure, and with FDI initiated, the foreign currency will start flowing in, which would help bridging TRADE DEFICIT which is a very crucial need of hour today. Now with both the deficits bridged to quite an extent our CURRENT ACCOUNT DEFICIT would also get narrowed down and our currency can finally inflate and inflation rate consequent upon this rise in value of our currency would finally fall. The initial rise in price consequent upon the inflated diesel price is just a small snag hoarding us from the big and true picture.

At the end I’d like to wind up by saying that yes our government has disappointed us with scams like 2g and coal, and our doubts and qualms against their intensions are very much justified but we need to stop being cynical about everything they do. We should think about the pro’s too and stop getting our thoughts and deeds mislead by the people claiming to be supporters of so called “aam aadmi” when all they want is just their political agendas to be fulfilled.