Caps are good, but then caps limit R&D
The increase in FDI into India from $129 million in 1991-92 to $35 billion in 2008-09 happened due to gradual opening up of the economy and invaluable contributions by organisations like FIPB and DIPP. But some sectors that can determine our progress heavily—defence, print media—are still lagging behind in FDI due to investment caps.
The recent rejection of the joint venture proposal of EADS Deutschland GMBH and L&T because it could have exceeded the sector cap of 26% in defence has come as a disappointment. The current cap has undoubtedly invited overseas defence OEMs like BAe, EADS and Lockheed Martin to hugely invest in India’s defence but is not enough an incentive for them to share their proprietary information as they do not foresee a healthy economic return in spite of their conformance to rigorous shop establishment procedures. By increasing FDI, these companies can get in collaboration with the local players to develop state-of-the-art technology in defence.
Likewise, relaxing caps in the insurance sector will lead to more IPOs being floated by the private players. Relaxation in FDI in print media is also welcome. The concern of self-regulation of media and upholding of journalistic ethics can be dealt with effectively considering active public voice and sensible journalism.