Are these 3 letters answer to India's woes?
In this issue:
» India still attractive to foreign investors
» China's interest in dilapidated UK infrastructure
» FDI in retailing a big boost to Indian IT
» Minority shareholders to find more voice in decision making
» ...and more!---------------------------------------- Have an enriching Saturday! ----------------------------------------
Can Europe find a solution to end the current economic crisis?
Will the new economic reforms drive the stock markets?
Are we paying a price for bad democracy?
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What happened in 1991 was not just a resolution to open up India's bureaucratic industrial set up. The economic liberalization was the outcome of policymakers, entrepreneurs and investors desiring to break away from a shackled existence. Besides the reforms, there were the intent and determination to bring in efficiency, quality and better shareholder returns. The result of this was improved socio economic well being.
As we stand today, FDIs may bring in some much desired long term investments and foreign exchange. But if one checks the progress of projects in sectors like steel that have attracted the maximum foreign investment, the results are appalling. Policy inaction on land acquisition and sourcing of raw materials like coal etc have stalled projects that should have been commissioned years back. Sectors like power have scarcity of funds as the least worry. Inefficient state electricity boards and poor coal mining policies have brought the fate of this once sun shine sector for investors to pitch darkness. Retailing sector itself may not be able to make the best use of the proposed FDI if the issues concerning logistical bottlenecks are not resolved at the earliest.
That India needs to pile up more foreign exchange given the volatility in currency markets and risky fiscal deficit position is a no brainer. But opening up more avenues for FDI cannot be the solution to all problems. A nimble approach to resolving policy bottlenecks and making the stakeholders on projects more accountable may give a better headway to India than even the biggest FDIs.
Do you think that opening up more sectors to FDI can resolve most of India's economic problems? Let us know your comments or post them on our Facebook page / Google+ page.
01:15 | Chart of the day | |
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Data source: Economist |
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And who would benefit from all this? In all likelihood, Indian software majors such as Infosys, TCS and Wipro. Currently these companies fetch 12 to 15% of their revenues from the retailing space. They are already working with the foreign retail companies in the overseas markets. Therefore, they are well poised to win the new deals from the retail companies in India as well. Hence, this new FDI policy in retail sector augers well for the Indian software sector.
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SEBI (Securities & Exchange Board of India) seems to have finally awakened to the issue. The regulator is considering the idea of setting up a platform to bring together the dispersed minority shareholders. Institutionalisation of the voting system, facilitating participation in general meetings through electronic means, etc. are some probable initiatives that the market regulator is considering. We believe this is move in the right direction. Such a common platform can help shareholders to understand a company better, make them aware of the significance of their voting rights, and thus, help in improving corporate governance.
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04:50 | Today's investing mantra |
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4 Responses to "Are these 3 letters answer to India's woes?"
Dharam Dev
Nov 28, 2011About your comment on powerless say of minority shareholders, i would say that we should consider a cap for promoter's shareholding to 40% or so as is done in the case of Banks in India with much lower cap. Such measures would increase power in the hands of minority shareholders. How about such a measure?
Ramana Kumar
Nov 28, 2011Govt is creating long term problems while looking for short term solutions. Currency weakness is a short term problem. Opening FDI may bring in Dollars, but only over the medium term. It may in fact create long term problems for millions of families in the country. It is said there is tremendous wastage in current Indian retail system. Is there enough un-biased research to back this claim ? What are the wastage ratios for US Style retail ? What are the costs to society ? Is there any research at all on this ? Perhaps foreign companies are using this opportunity of weakness in Indian economic situation to push thru their agenda.
Digambar Kulkarni
Nov 28, 2011If FDI comes to retail markets:
1. If forein exchange X comes, 0.7X wiil go to the Multinational and 0.3X will come to India. Thus India will be benefitted but the Multinational will be benefitted more;
2. The intermediatory in the business wiil be wiped out. He will have to find other type of work, till then there will be unrest....politicians will take undue advantage of it, the sufferer will ne the Nation!
3. The consumer will pay more for the same goods adding to the inflation.
4. The producer will get a better price. The profit earned by the intermediatories so far will be shared by the producer and the Multinational. The Multinational, who will have better financial strength, will ensure that he will be benefitted more than the producer.
5. Quality of products will have to improve.
6. We should welcome the change. All Economies, as it is ,are connected. The developoig economies are affected by the developed world. Accept the Change and work it to the economic success of our Nation.
DHAWAL AMAR SINGH
Nov 30, 2011The foreign companies are expected to bring better management and certainly not better than AMUL CO-OPERATIVE. Than why not copy this model for essential food products? The force of the money will eliminate more people and the producer margin will decrease due force of bulk. The profits generated will move out of the country, the long term loss. Before allowing the foreign companies in this field let them commit the profit generated will be ploughed back in India. The expected result, none will opt.