Juxtaposition between FDI and Politics
How whims of “powers-that-be” damage an otherwise lucrative investment environment
I must stress the fact that I don’t mean to indicate in any manner that our policies and environment must shape itself to appease foreign investors. We certainly can do without foreign funds; our stock markets have bounced back in a remarkable manner after the staggering drop almost a year ago. FDI is vital for contribution of technical, managerial and operational expertise in the forms of joint ventures, strategic alliance or a typical partnership. That is why the Gujarat Government conducts a biennial summit for attracting foreign investment in different forms. The class of Small and Medium Enterprises is often ignored when measuring economic parameters of a region or a state; but imagine the impetus SMEs will get if foreign investors want to co-participate in making them the next Ambani or Tata. Indeed, this contribution is often accompanied by investment in different combinations and volume. Foreign investors shall not focus as much on the merit in whimsical decisions taken by a government than on the possibility of whim itself. Today, an Ambani or a Tata can safely invest in Gujarat since it has a strong local presence and it enjoys the goodwill of the government. A Warburg Pincus or a Blackstone Group does not and, indeed, cannot share the same confidence and, therefore, goes by a lot of external factors, one of which includes stability and consistency in the state leadership’s functioning. The decision-making by this foreign private equity group is often influenced by the same factors that make the stock markets oscillate like a hypersensitive human. Factors like the state government’s disturbing indifference to the communal riots, chiding remarks in election rallies and inexplicable and ungrounded bans on fundamental rights are highlighted in red in any due diligence reports sought by foreign investor groups.
Mr. Chief Minister,...