Investment In India | "Companies with FDI plans in India must change their strategy"

By : Manjeet Kripalani 
Source : http://economictimes.indiatimes.com
Category : Investment In India

In March 30, India's National Green Tribunal suspended the environmental clearance granted a year ago to South Korean steelmaker Posco's planned $12-billion plant in Odisha.

The surprise judgement came a week after Prime Minister Manmohan Singh returned from a congenial state visit to Korea, assuring Koreans that their Indian investments were a 'priority' for him and that India would move forward with the Posco project. The project, planned since 2005, is yet again in limbo.

There are various theories doing the rounds on the Posco hold-up. Ministers from Odisha's ruling party, the BJD, call it a conspiracy against the state; others whisper that Posco global rival Arcelor-Mittal is queering the pitch; the mining association blames "vested interests in the US and Western Europe" for derailing India's development.

WHERE'S THE BOOM?
Whatever the theories, the real reason is simply policy paralysis in New Delhi. Investment, both foreign and domestic, needs stable policies, and a secure tax environment. Delhi has no policy guidelines, and the existing policy frameworks are subject to arbitrary change.

Vodafone, 2G, Vedanta, Posco: all these investments which began with such promise, have become captive to capricious politics, made worse by the corruption scandals being unearthed every day. Crony capitalism is rampant. Who will want to invest in India?

Very few. Investment both domestic and foreign has taken a dive in the past two years: FDI fell from $35 billion in 2009 to $25 billion in 2011.

Even the more tolerant domestic business, looking at billions stuck in stalled projects and attacked every day by the taxman, is refusing to invest much more; those which can, are heading to more stable investment climes abroad. Searching for resources and markets overseas is the norm with any expanding economy, but in India, it seems like a forced exile.

We ought to be in the middle of a manufacturing boom, with a dynamite domestic market calling to the world. We have natural resources all on our side. India is rich in coal, with 7% of the world's coal reserves. We have the sixth largest reserves of aluminium in the world and are the lowest cost producers.

There are 500 million young Indians below the age of 25, filled with ambition and dreams. Right now, there are few prospects for either their talent or our natural resources.

India desperately needs the foreign investment. There's money at home but not the new technologies, valuable skills-building and job discipline that overseas investment brings. Foreign investors want India's market.
Perhaps it is time for foreign investors to change the way they view and plan for India.

MAKE LITTLE PLANS
First, India is in a dramatic structural transformation. The state matters more than the Centre, regional parties are more significant than national ones. Don't expect a bailout from the Centre - the nerdy economists in North Block are great for Davos but not for Dhenkanal in Odisha.

Instead, deal directly with and cultivate the leaders of the states, which are now growing increasingly powerful, federalised and independent from Delhi.

Source : http://economictimes.indiatimes.com/news/economy/finance/companies-with-fdi-plans-in-india-must-change-their-strategy/articleshow/12574161.cms