21.9.15

FDI doesn't directly boost an economy the size of India

.
.
.
.
FDI can boost the economy of a small PPP GDP country like Malaysia or Singapore. It can make the difference, where exports constitute a high percentage of GDP.

HOWEVER, a country the size of India with a PPP GDP of around $7.5 trillion, then FDI plays little or no part in development ultimately. 

What matters is government led initiatives to mobilise the domestic resources of the country through:

1. Efficient taxation.....budget to GDP RATIO is high...40--50 of GDP, and that a high percentage of the budget is allocated to DEVELOPMENT, especially INDUSTRY and INFRASTRUCTURE. Stalin's Soviet Union, and the crash course industrialization program of 1928-1941.....where the Soviet economy went from 18% to 45% value of the equivalent USA economy. FDR's New Deal in the USA...1933--45. China under Deng Xiaoping.

2. The wholesale abolition of archaic labour laws.

3. Reform of land laws which automatically favor development over small farmer rights.(Soviet Union, Communist China, The USA....cattle ranchers and small holders against the great railway companies).....no NGO bullshit about small farmer rights. It never existed in the UK during the first modern Industrial revolution 1750--1850....etc and so on.

4. Special tax exemption for business.

5 Special Economic zones.

6. Destroying ALL bureaucratic hurdles in the ease of doing business.

7. Fighting local economic mafia's.....sand mafia, coal mafia's etc

8. Private and government investment opportunities which clearly benefit private investors over ultimate government profit.

China will re-invest anything between $6-8 trillion this year alone back into her economy. FDI represents only about 2% of total Chinese investment inside China.

Of course that is not to say that FDI doesn't have some utility, it does. Through FDI you can import technology that the country simply does not have.

For India to jump from a $7.5 trillion economy to a $50 trillion economy by 2050 MEANS massive mobilization of domestic resources...using the above. It won't happen in any other way.

Modi's foreign trips are an indication of his insecurity, his craving for acceptance and the fact that the Israelis and the USA brought him to power. Two/three trips to the USA just over one year is not good for India, and providing strong independent leadership to the country.

_____________________________________________ 


India received $20 billion in FDI in 2014-15 from countries that PM Narendra Modi visited