Govt wants FDI in new sectors but lacks political resolve
With the controversy over FDI in retail fresh in their minds, the government has quietly highlighted its wish for further reforms - but without going into details.
By G Ganapathy Subramaniam, TNN |
It���s official. The government wants to open up new sectors to foreign investment but lacks political resolve. If the government dithers on opening up critical areas like retail to foreign direct investment (FDI), blame it on the Left.
The Economic Survey leaves no doubt that the government wants to allow FDI in retail, luxury brands and rural banks. And the old plan to hike FDI in insurance to 49% has been dutifully recalled with a wish to allow 51% FDI for health insurance and weather insurance.
That seems a pipedream right now, and the only way it could become a reality is if the next government comes to power without the Left riding piggyback. As of now, the UPA government has made its intentions clear.
But with a slew of state assembly elections in 2008 and general elections the year after, they may not make undue haste to implement it. Yet by announcing its wishlist, it has also underlined that the UPA has not forgotten or forsaken reforms totally.
With the controversy over FDI in retail fresh in their minds, the government has quietly highlighted its wish for further reforms ��� but without going into details. The earlier proposal to allow FDI in retail of electronics, sports goods and stationery stands modified.
The concept of FDI in single-brand retail is being expanded to outline 100% FDI in specialised retail chains dealing with luxury brands, consumer durables and semi-durables. That���s a tall order considering the government had to bend backwards in its recent FDI review to say that foreign investment would not be allowed in retail!
The proposal for 49% FDI in insurance as compared to 25% at present, is not new. The government has already realised that it is difficult to skirt the Left when it comes to foreign investment in areas like retail and insurance.
The proposal for 51% FDI in health insurance and weather insurance may be a different ballgame, however, if the UPA manages to explain its benefits to the general public and farmers. The idea of allowing more FDI in banking should be first bounced off the RBI. The apex bank has been quite stringent about expansions by foreign banks and 100% FDI in rural-agricultural banks may not pass RBI���s muster.
Interestingly, the Economic Survey mentions that such rural-agricultural banks (with 100% FDI) should be allowed to take over other banks! Maybe, that���s just the government thinking aloud. Wishful thinking, considering that in the current scenario, there is little chance of proposals jumping the Red light.
The Economic Survey leaves no doubt that the government wants to allow FDI in retail, luxury brands and rural banks. And the old plan to hike FDI in insurance to 49% has been dutifully recalled with a wish to allow 51% FDI for health insurance and weather insurance.
That seems a pipedream right now, and the only way it could become a reality is if the next government comes to power without the Left riding piggyback. As of now, the UPA government has made its intentions clear.
But with a slew of state assembly elections in 2008 and general elections the year after, they may not make undue haste to implement it. Yet by announcing its wishlist, it has also underlined that the UPA has not forgotten or forsaken reforms totally.
With the controversy over FDI in retail fresh in their minds, the government has quietly highlighted its wish for further reforms ��� but without going into details. The earlier proposal to allow FDI in retail of electronics, sports goods and stationery stands modified.
The concept of FDI in single-brand retail is being expanded to outline 100% FDI in specialised retail chains dealing with luxury brands, consumer durables and semi-durables. That���s a tall order considering the government had to bend backwards in its recent FDI review to say that foreign investment would not be allowed in retail!
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The proposal for 49% FDI in insurance as compared to 25% at present, is not new. The government has already realised that it is difficult to skirt the Left when it comes to foreign investment in areas like retail and insurance.
The proposal for 51% FDI in health insurance and weather insurance may be a different ballgame, however, if the UPA manages to explain its benefits to the general public and farmers. The idea of allowing more FDI in banking should be first bounced off the RBI. The apex bank has been quite stringent about expansions by foreign banks and 100% FDI in rural-agricultural banks may not pass RBI���s muster.
Interestingly, the Economic Survey mentions that such rural-agricultural banks (with 100% FDI) should be allowed to take over other banks! Maybe, that���s just the government thinking aloud. Wishful thinking, considering that in the current scenario, there is little chance of proposals jumping the Red light.
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