The small scale sector has continued to receive protection from the Government when it comes to foreign investment, despite liberalisation pervading in the economy generally. It is time to alter that position, argues an editorial in today’s Financial Express:
“Foreign direct investment (FDI) in small-scale industry (SSI)? It could be just what the sector needs. In fact, the government’s reported move to liberalise FDI here by shifting the approval regime from the case-by-case approach currently used by the FIPB to the automatic route, and by perhaps even raising the industry-specific caps on foreign equity ownership, could boost India’s prospects in the race to secure global capital for its Economy. Foreign money brings with it new expertise, international discipline in the deployment of funds and sometimes even strategic inputs, from which entire market segments tend to benefit. Ideally, of course, the entire SSI list—there are 35 industries still on it reserved for small players—should be scrapped and 100% FDI invited in all manufacturing sectors, big and small, with only a handful of strategic industries kept out of foreign control. But if the proposed FDI-in-SSI move has the effect of impressing upon our reservationists the value of foreign inputs, then maybe this is a clever way to pry open the sector for bigger and better things to come.”
Perhaps there is merit in reviewing the current approach of the Government.