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.
The current case-by-case FDI system has far too many stipulations to make any difference to the fortunes of the sector. The 35 industries on the SSI list include food products like pickles, chutneys and bread, most ground and processed spices and a few edible oils like non-solvent extracted mustard and groundnut oil. One might think that foreign investors? interest in these is rather low, but this will not be known until the doors are properly thrown open, no FIPB questions asked. Steel furniture and domestic utensils, which have huge export potential and are in desperate need of quality upgradation even within India, might attract a lot more interest. All in all, however, business opportunities can be found in the unlikeliest of places, and it would be good if global capital can reach wherever it wants to without needless restrictions. For decades on end, India?s stance on foreign investment was one of suspicion, and protectionist policies did Indian business no good by letting it get away with mediocrity (or worse). It is time India started pushing all its manufacturing units?without exception?towards global excellence. The money is readily available. The talent exists. Old policies from the licence-permit raj days should not come in the way.
