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FDI Caps May Head for Exit

Issues that created the most controversy look to be first on govt agenda

The Congress-led UPA government has issued its first signs of a much more pro-active stance on certain big issues that it had ignored during its last term citing insurmountable differences with its erstwhile coalition partners, the Left.

With the recently-held general a elections giving a huge majority this time to the Congress, there is unlikely to be any excuse that could be tenable and the government seems to have realized that.This may well have been the reason that brought one of the senior Congress leaders out to speak on the issue to give the country an early look into what the government, in its new term, is thinking of.

According to Cabinet Minister Kamal Nath, the government may well move towards a more liberal regime and allow the entry of foreign direct investment (FDI) in a host of sectors including insurance, civil aviation and even the once-taboo, defence production.

Speaking in a TV interview, Nath said that the insurance sector needs more capital and there is a crucial need to allow the sector access to foreign funds. FDI is capped at 26 per cent for FDI in both these sectors.

The going may be easier for the insurance sector as the government, in its pervious term, had introduced a bill in the Rajya Sabha to hike the FDI limit.

However, he was much more reticent (most probably due to the mayhem generated by multinational investment banks in the ongoing global financial crisis and the central bank’s, RBI, unwillingness to look at loosening the strings with which it is tied to all banks in India) when it came to allowing the same for the banking sector, saying it needs to be studied further before any steps are taken.

Aviation, which has been hit by a slew of negatives, from rising oil prices to falling passenger numbers and their inability, enforced though it may be, to restructure properly as they are not being allowed to shed excess employees, is crying for more capital through the FDI route from foreign airlines, which has not been allowed.

These solutions, if and when they are implemented, will go a long way in addressing some of the issues that are troubling corporates involved in them, making their future that much more brighter. But, what the Congress minister left unsaid was the government take on one of the most crucial of economic concerns, disinvestment. Neither was he very forthcoming on his government’s stance on lifting of subsidies. While these are just a small part of the whole economic juggernaut that is India, taking a few decisions fast and letting others fester over the long term will not deliver the kind of solutions that people in India want – bjli, sadak, pani. However, as can be seen from these aspirations, India has moved quite far from its previous low of people’s demands where roti, kapda aur makaan dominated. Progress is there, the idea is to accelerate it and consigning FDI caps to the dustbin of history may be just the starting point.