That the government has chosen to loosen sectoral FDI caps in a wide scatter of industries after a gap of almost two years?the last move was in telecom?is a positive sign more for the direction of movement it signals than what it does for the Indian economy. There is nothing very dramatic about the implications of the latest moves, unlike the earlier initiative that raised FDI limits in certain telecom services sharply from 49% to 74%. But the lethargy that had crept into the reform process was so excruciating that any indication that India is opening itself further comes as relief. The government?s Left allies have been making a fuss about FDI, and so it is not a surprise that the cap revisions have been modest. In aviation, for example, regular passenger flight services have been left capped at 49%, as before, while 74% equity control is now allowed in chartered service airlines and cargo operators. Effectively, the aviation sector remains protected from foreign competition. This is hardly the sort of opening up that would thrill movers of global capital. The magic ?100% FDI? banner, however, has also been waved in the air?for helicopter and seaplane services, apart from a little-noticed mineral sector, titanium mining. These moves, too, are unlikely to exercise anyone unnecessarily. Meanwhile, a more liberalised investment regime in the oil sector is welcome. This is a globalised sector, and having foreign equity participation here makes enormous sense no matter how one looks at it. India?s energy deficiency is an issue that must be addressed through all means possible, and without ideological drags and irrational alignments of any kind. Meanwhile, the continued restrictions on investments in the coal sector, even as coal imports surge, only betray the Centre?s readiness to pander to vested interests at the cost of energy security.
India needs to re-examine the entire rationale of ad hoc FDI limits in different sectors, especially those that have no implications to national security. A jumble of different regulations makes for policy inefficiency. Perhaps it is time to wipe the matrix clean and offer either 100% equity control to foreign players or none at all in different sectors, depending on which are regular fields of business and which involve information and other things that must be kept secure within the country.
