Slamming the UPA government for its move to relax FDI norms in some sectors, Chief Minister Jayalalithaa on Tuesday said it was “neither an effective nor an appropriate measure to tackle the macro-economic imbalances faced by the country.” Much more, the Chief Minister in a statement said, has to be done by way of policy initiatives to promote exports and to set right the current account imbalances.
Stating that such announcements were only a knee-jerk reaction to the problem of the falling rupee, she said a depreciating rupee contributed to inflation. The UPA government, Ms. Jayalalithaa said, appears to be acting at the behest of foreign interests and some external rating agencies that frequently threaten to lower the sovereign rating to ‘junk status.’ For the rupee to remain strong, what is needed is a concerted policy action to promote exports, curb imports of non-essential items, and to eliminate speculative trading in the forex market.
The decision of the Cabinet Committee on Economic Affairs approving the raising of the FDI caps also raises serious security and related concerns, “which have been totally ignored. The adverse impact on domestic industry, including on central public sector enterprises and employment has also not been factored in.”
In the telecom sector, the increase in the FDI cap from 74 per cent to 100 per cent, the Chief Minister said, has implicit security concerns since foreign companies would be able to control the entire telecom network. Data security and privacy issues would arise, which will be very difficult to regulate.
On increase in the FDI cap in plantation sector to 49 per cent on the automatic route and up to 100 per cent with FIPB clearance, Ms. Jayalalithaa said Tamil Nadu, which has a large number of small tea growers, was not for allowing foreign investment in this sector. Such a move would tip the scales in favour of the larger plantations and jeopardise the livelihood of the small growers. It would also reduce the small tea growers to labourers within a few years.
The announcement that the Cabinet Committee on Security (CCS) may consider higher investment levels for state-of-the-art technology in the defence sector lacked clarity, said. Noting that the national interest should not be allowed to be compromised in any way, she said there were grave security and self sufficiency concerns by allowing FDI in the sector.
Ms. Jayalalithaa said increase in the cap on FDI in single brand retail up to 100 per cent on the FIPB route and 49 per cent on the automatic route was the “thin end of the wedge”. Since single brand retail involved setting up of sale outlets by manufacturing or marketing companies at different locations, decisions in this area should be made subject to the clearance of the State governments as in the case of multi-brand retail. This would help protect small retail trade.
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