Economy mirror: dissent versus invest FDI
India has witnessed two types of foreign direct investment (FDI) —- one for economic growth and other to stall it. The former had failed to improve sentiment as the latter has managed to create an environment against development.
India on average received over Rs 10,000 crore from foreign funding agencies in recent years under the Foreign Contribution Regulation Act route, which was almost double of the money it got in early 2000. Not every penny of this has gone for dissent. But a handsome amount has been channeled for dissent as the Home Ministry, which monitors the foreign fund flow to non-governmental organizations, not having wherewithal to check such foreign money flow.
Prime Minister Manmohan Singh had pointed out that foreign money was being used for demonstrating against projects which can attract foreign investment but his government did not take much action against such protests. The reason was simple — creating dissent in not an unlawful activity in India.
But, impact of such dissent is visible with the economy slowing down to its lowest levels in a decade and the investor sentiment fading. Such had been the wave of dissent that many major investments like Posco Steel Plant in Orissa had failed to take-off and many of the NGOs opposing this project are being funded by US based organizations.
Name any important sector key for economic growth. You will find civil society groups standing against it in the name of protecting environment or people.
India’s finest coal reserves have remained un-mined as some of the NGOs are hell-bent to ensure that mining does not take place. Same is the story with other minerals.
The traditionally cheap minerals had helped growth of the infrastructure manufacturing sector. With rising dissent leading to delay in environmental approvals, the companies have been forced to import minerals resulting in India losing its competitive price edge. And, subsequently it had caused slowdown in the manufacturing sector thereby impacting the overall economy.
Nuclear energy, attractor for foreign investment and sustaining economic growth, is facing stiff people resistance across India. According to government estimates, nuclear sector can attract foreign investment worth Rs one lakh crore in the next decade or so but it remains a distant dream as dissent has negated the investor sentiment. There has also been opposition to foreign direct investment in multi-grand retail.
One cannot blame the perpetual dissenters of development for the stalemate. The lack of clarity in government policies and frequent tinkering had created a situation conducive for NGOs to block projects. The environment impact assessment necessary for big projects has been changed over 100 times since 2006 when it was notified. Rules at the state government levels frequently change helping dissenters more than the investors, who take benefit of them to initiate a legal process against developmental projects.
Instead of bringing reforms at policy levels, the government has created more hurdles in the name of regulation in recent years. The UPA-2 has seen return of license inspector raj in key infrastructure sector a prime cause for investors turning back on India. The last five years have seen spurt in foreign funded dissenters.
If FDI for investment has to win, India will require stability and uniformity in policy so that dissenters do not get chance to create noise beyond certain point.