Hidden barriers hit FDI: Study

NEW DELHI: Many hidden barriers to FDI in manufacturing, especially procedural problems are holding up the flow of foreign investment into India, says an ICREIR study on developing a globally competitive manufacturing sector in the country.

Discussing the study, Dr Rajiv Kumar, director of the institute said the inflow of FDI was crucial to expand the indigenous market base. He said this did not mean any conflict with encouraging the local entreprenuers to spread their wings in the country.

The entry barriers according to the study were the heavy handedness of lower level staff, in departments, the delay in clearances and often cumbersome processes. The study also points to the exit barriers that block capital and the need for expanding the educational skills.

Instead, he suggested, there was a need to spread mass manufacturing, which was at present not very widespread in the country. The theme was also reiterated by Pankaj Chandra, professor — IIM Ahmedabad, who said there were examples both within the country.

He said the TAMA region of Japan and Amul in Gujarat had both been outstanding examples of such processes. Culling statistics, Dr Kumar said India needed to develop high quality and low price products.

These products would in turn position India in some sectors with a dominant share. The ICRIER study says that compared with a 362 million tonnes of steel produced by China annually, India produces only 38 million tonnes.

As a result the value addition done by the manufacturing sector in India was not only lower than China, but also lower than Korea or Brazil. He said other than gems and jewellery, there were no sector where India enjoyed a big share of exports globally.