The government is introducing FDI to acquire investment in cold chain management by foreign companies but the same could also be done by Indian companies.
Mr. Arun Jaitley has alleged that foreign companies are giving contracts for cold chain management to indian companies. It begs to ask:
Why do we need FDI? Why not Domestic Direct Investment (DDI)?
The need for FDI is justified only in two situations –
(1) when DDI is inadequate or
(2) when foreign exchange is required.
On the DDI front, the position as obtained in our country is fairly sound. Banks are flush with funds; the domestic savings rate is one of the highest in the world; market capitalisation, constantly on the rise, makes available investible funds; and DFIs have huge unutilised funds waiting to be deployed in feasible projects.
The need for FDI is justified only in two situations –
(1) when DDI is inadequate or
(2) when foreign exchange is required.
On the DDI front, the position as obtained in our country is fairly sound. Banks are flush with funds; the domestic savings rate is one of the highest in the world; market capitalisation, constantly on the rise, makes available investible funds; and DFIs have huge unutilised funds waiting to be deployed in feasible projects.
Interpretation:
Instead of making structural efforts to address the issue of wastage of food (5-18%) by encouraging cold storage chains infrastructure.The government is trying to mandatorily make foreign investors do it (apparently!) And the cost of FDI would be profits repatriated to home countries decreasing our forex reserves. Watch out for the increasing trade deficit! :|
Details: http://www.thehindu.com/todays-paper/tp-features/tp-openpage/fdi-in-retail-say-a-big-no/article4155369.ece
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