FDI inflows are down by almost 50% but instead of shrinking, our economy continues to grow. This is a fact, yet FDI-ideologues say we must provide unconditional entry to foreign companies if we want to grow economically. Ignore them. The time has come to put curbs on FDI. Our ‘experts’ are obsessed with the premise that larger FDI inflows are essential for higher growth but there is hardly any empirical evidence to support the claim. On the contrary, restrictions on FDI have not necessarily led to poor economic performance in most countries. Numbers relating growth with FDI fail to prove any significant correlation between these variables. On the other hand, a strong and positive correlation between net domestic savings and GDP growth exists. For higher growth, we need more domestic savings, not FDI.
The focus on attracting FDI has led our policymakers to ignore domestic sources of investment. We should welcome the declining trend in FDI and get back to the domestic savings-led growth strategy. There is no shortage of capital in India, sound projects and efficient organisation will attract it. Certainly, the propaganda regarding inadequacy of local capital does not hold much water. It was not the lack of funds, but restrictions and limitations put by the government on Indian industry that crippled our economic progress in the last few decades. By negating Indian talent, investment and technology, we cannot progress. We must realise that India can only be built by Indians.
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Like Africa and Latin America, most FDI inflows to India are directed towards exploiting natural resources. This needs to be curbed. More than capital, we want jobs. The entry of foreign firms in capital-intensive industry won’t reduce unemployment. There is no need or compulsion to allow foreign capital.
We are not obliged to provide investment opportunity or business incentives to foreign capital, particularly when our skilled workers are made unwelcome in developed countries. FDI should be allowed in specific areas if we need it, on terms warranted by national interest.
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