New Delhi, Oct. 27: The BJP-led central government has decided not to allow foreign direct investment (FDI) in plantation crops other than tea.
Despite a number of representations seeking permission for FDI in other plantation crops like coffee, spices and rubber, the central government has taken a stand reiterating an earlier decision that it is not advisable to open these sectors up as yet as Indian promoters are unwilling to face up to foreign competition at this juncture.
Consequently, the Foreign Investment Promotion Board (FIPB) has been given instructions to block any proposal for FDI in these sectors.
For some time, the government had been thinking of targeting the food sector as the next big catchment area for FDI and industrial lobbyists had hoped this would lead to a rethink on FDI in various other crops.
With spices, coffee and rubber being some of the crops that the the Indian government is likely to agree to import from south-east Asia and Sri Lanka at lower duty rates, many felt that the government thinking on FDI in this sector would change.
It was argued that if the products were to be allowed freer entry, then it was advisable that capital too was allowed in such a way that global giants remain interested in India as a producer of these goods and not merely as a market.
The need for a rethink on FDI in the food sector came after it was detected that India’s FDI inflow had more than halved from $1.2 billion during April-July last year to $529 million during the same period this year.
Over the last few years, most of the money was flowing into investments in IT and IT-enabled services and telecommunications.
In fact, the biggest beneficiary from foreign direct investment in India has been electronics, IT and IT-enabled services which together accounted for 14.2 per cent of the $ 33.5 billion inflow since 1991. Telecom was a close second accounting for 12.8 per cent.
However, the problem was that investments in these sectors have run out of steam and as finance ministry officials readily admit “you can’t keep on setting up IT-enabled centres.”
The last such cycle saw an auto sector-led FDI boom in 1997 with inflows topping $3.5 billion.
Huge investments flowed into automobile plants in the country with virtually every automaker from developed world giants Fiat and General Motors to Korea’s Hyundai rushing in to invest.