QUESTION : Critically analyse the reasons behind the low foreign investment can be seen in India and give suggestive measures to boost such investments as far as Indian economy is concerned.
Topic- MIXED MESSAGING
WHAT ?
- Issues of Foreign Investment
WHY IN NEWS ?
- Prime Minister Modi elaborately pitched India as an investment destination that could serve as a manufacturing hub at the heart of global supply chains
SIGNIFICANCE TO THIS MOVE :
- The worsening relationship between the U.S. and China and the ongoing trade stand-off between the world’s two largest economies present a unique opportunity for India to woo U.S. investors and multinationals looking to shift from China to set up their bases in India.
- Even if a few multinational enterprises can be drawn to set up manufacturing bases, either by shifting facilities or as new additional plants, this would benefit the Indian economy through increased FDI, new jobs and higher tax revenue for the government.
- There is also strategic significance involved in the pitch given the escalating border feud between India and China and India’s economic and trade ties with China.
U.S -INDIA STRATEGIC PARTNERSHIP FORUM :
- Established: The USISPF is a non-profit organization established in 2017.
- Objective: Strengthening the USA-India bilateral and strategic partnership.
- Aim: Strengthening economic and commercial ties between the two countries through policy advocacy that will lead to driving economic growth, entrepreneurship, employment-creation, and innovation to create a more inclusive society.
- Enabling business and governments to collaborate and create meaningful opportunities that can positively change the lives of citizens.
- Theme for 2020: US-India Navigating New Challenges.
- Economic Relations: In 2019, overall USA-India bilateral trade in goods and services reached USD 149 billion.
- USA energy exports are an important area of growth in the trade relationship.
RCEP :
The Regional Comprehensive Economic Partnership is a free trade agreement originally devised to consist of 16 countries across the Asia-Pacific region. The pact looks to drop tariffs and duties between the members so that goods and services can flow freely between them.
INDIA AND RCEP :
India has dropped out of the RCEP in November 2019 in ASEAN+3 summit, because of the following reasons:
o Widening Trade Deficit: India’s trade deficit with the ASEAN, Korea and Japan has widened post-FTAs.
o Tariff elimination due to RCEP could worsen the trade deficit, at $105.2 billion in 2018-19.
- The RCEP proposes that 92% of India’s goods would be tariff-free over the next 15 years. India have to slash existing tariffs on up to 90% of all goods.
- Since import duties are also a source of revenue for India, it could experience a disproportionate loss of customs revenue.
- India’s trade deficit with China is at $48.66 billion, further reduction or removal of customs tariffs will lead to an influx of cheaper products from China.
IMPORT SUBSTITUTION:
- Interestingly, most of the recent FDI announcements have been by way of stake acquisitions in existing businesses, and predominantly in the services sector.
- Over the decades, it has been established that global FDI investors prioritise and are even willing to pay a premium for policy stability and largely barrier-free access to local and international markets.
- The drive for self-reliance has spurred several Ministries to urge companies and industry sectors to replace imports with ‘Made in India’ substitutes.
- Separately, from the market access perspective, India’s decision to not join the RCEP multilateral trade pact would put investor companies seeking to tap consumers in RCEP member countries at a tariff disadvantage.
ISSUES OF MANUFACTURING SECTOR AMID LOCKDOWN :
- India’s manufacturing activity contracted at its sharpest pace on record in April as a lockdown to combat the rapid spread of the coronavirus led to a slump in demand and massive supply chain disruptions.
- Asia’s third largest economy is taking a huge hit from the ongoing nationwide lockdown, which started on March 25, and its gross domestic product is expected to shrink for the first time since the mid-1990s this quarter.
- Record contractions in output, new orders and employment pointed to a severe deterioration in demand conditions.
- With new orders and output shrinking at the steepest pace since at least early 2005 factories cut jobs at the fastest rate in the survey’s history, signaling a high chance of recession.
- A record slump in both input and output prices, suggesting a sharp fall in overall inflation which has held above the Reserve Bank of India’s medium-term target of 4% for six months, failed to stoke demand.
- Enterprises suffer from low productivity given that their small size and lockdown prevents them from achieving economies of scale.
- The jobs the small enterprises create are low-paying ones.
- Numerous regulatory roadblocks, unfavourable land and labour laws, inadequate transport, communication and energy infrastructure, among others.
OPPORTUNITIES FOR INDIA :
- There are, however, opportunities that appears to be emerging.
- While there is hope for a quick recovery in India, we have to make concerted efforts to realise this including an integrated multi-pronged approach through public policy support, private sector participation and citizens’ support.
- This presents a huge opportunity for India as many Companies plan to shift out of China. We need to prepare the ground forthwith to welcome such investment into India. We need to try and make life easy for investors.
FDI ?
- An FDI is an investment in the form of a controlling ownership in a business in one country by an entity based in another country.
- It is thus distinguished from a foreign portfolio investment by a notion of direct control.
- FDI may be made either “inorganically” by buying a company in the target country or “organically” by expanding the operations of an existing business in that country.
- Broadly, FDI includes “mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations, and intra company loans”.
- In a narrow sense, it refers just to building a new facility, and lasting management interest.
FDI IN INDIA :
- Foreign investment was introduced in 1991 under Foreign Exchange Management Act (FEMA), driven by then FM Manmohan Singh.
- There are two routes by which India gets FDI.
1) Automatic route: By this route, FDI is allowed without prior approval by Government or RBI.
- 2) Government route: Prior approval by the government is needed via this route. The application needs to be made through Foreign Investment Facilitation Portal, which will facilitate the single-window clearance of FDI application under Approval Route.
FACTORS AFFECTING FDI :
- Regulatory framework policy needs to be predictable
- Wage Rates
- Labour skills
- Tax rates
- Transport and Infrastructure
- Size of economy and its potential for growth
- Political stability
- Existence of commodities
- Exchange rate
- Access to free trade areas
CONCLUSION :
Attracting FDI into manufacturing will require the government to convince investors that it is committed not merely in words but in deeds as well to an open,barrierfree global trade and investment order.
WAY FORWARD :
- Investor’s confidence must be improved.
- Improving physical infrastructure from transport systems to the power sector is essential.
- Importance should be given to electronic sector.
- Improve access to finance for smaller enterprises.
- Making firm entry and exit easier.
- Inverted duty structure.
- Enhancing the flexibility of labour regulations.
- Aim for higher job creation in the formal sector and performance linked tax incentives.
- Attractive remuneration to motivate people to join the manufacturing sector.
QUESTION : Do you think the three-language formula is an attempt to ‘homogenize’ the diverse linguistic fabric of the country which consists of many regional languages? Analyse.
Topic- POLICY LESSONS IN TAMIL NADU’S LANGUAGE FORMULA
WHAT ?
Language Issue
WHY IN NEWS ?
The New Education Policy misses the case of Tamil Nadu following a language formula that is distinctly at variance with that of Delhi for the past 50 years
TAMIL NADU’S LANGUAGE POLICY :
- It follows a two language policy which is at variance with Centre advocation of three language policy.
- It was the decision of C.N. Annadurai, who led Dravidian Movement, that beyond Tamil and English (in order of preference) no other language would be taught in the schools of Tamil Nadu either as a language or medium of instruction
- Tamil Nadu witnessed widespread agitations in 1965when the then Congress state government had attempted to make Hindi the state’s official language.
- Opposition from Tamil Nadu in 2019 had forced the Centre to amend the draft NEP and withdraw a proposal to teach Hindi as a third language in schools in non-Hindi speaking States. Yet in the recently approved NEP, the three-language formula finds a place.
- Despite the clarification that the NEP, 2020 would not lead to the imposition of any language, this has failed to convince some sections.
- Currently, the three-language system is not followed in Tamil Nadu.Tamil Nadu follows the two-language policy of Tamil and English.
- Education is a state subject and the implementation of any policy lies with the states.
IMPORTANT CONSTITUTIONAL PROVISIONS :
- Article 29 of the Constitution of Indiastates that any section of the citizens who have a “…distinct language, script or culture of its own shall have the right to conserve the same.”
- Article 351 gives power to the union government to issue a directive for the development of the Hindi language.
LANGUAGE POLICY ADOPTED BY VARIOUS DEVELOPED COUNTRIES :
- Most countries follow a one-language formula (invariably mother tongue) for teaching children in the primary classes.
- On reaching middle school they are given a chance to learn one more language, mostly English.
- As there is no imposition through schools, voluntary learning of other languages is widely prevalent in these countries.
LANGUAGE POLICY IN SINGAPORE :
Under the leadership of Lee Kuan Yew (first PM of Singapore from 1959 to 1990)
- In Singapore, 74.2% of the population is Chinese, 13.2% Malays and 9.2% Indians.
- Singapore had much more justification to adopt Chinese as its sole official language than India insisting on Hindi being the sole official language. Even today the population of Hindi-speaking people has not crossed 50% in India;
- If Lee Kuan Yew(LKY) had wished he could have well declared Chinese to be the sole official language and satisfied the Chinese who were in a majority.
- However, LKY used language policy as a strategic tool to achieve socio-economic development.
- Giving equal status to English and mother tongue was considered by LKY as a prerequisite not only to work closely with the international community but also to bring in big ticket changes.
- The two-language policy prepared Singaporeans in advance for globalisation.
- Many compare this policy with C N Annadurai’s view on language
IMPORTANT PART OF ANNADURAI’S LANGUAGE POLICY :
- He insisted that all the national languages should be made official languages and English should be the common link language.
- He held that the official language should be equidistant to all the members of a multilingual society. English would fit the bill for both students of Hindi and Tamil.
- Making Hindi alone as the official language would create disparity among various linguistic groups other than the Hindi-speaking population which will result in partial treatment, giving unfair advantage to the Hindi-speaking population.
- Annadurai was also particular that English is the language we communicate with a larger world.
- What Annadurai dreamed of as a language policy for ‘the Dravidian land’ was actually implemented in Singapore by Lee Kuan Yew.
HAS TWO LANGUAGE POLICY WORKED WELL IN TN ?
- Though comparable to Singapore in language policy, Tamil Nadu’s education standards are not comparable to Singapore’s in terms of outcomes.
- Students in the state suffer a serious handicap while dealing with English and Tamil languages. And they do not have command over either.
- Counter Argument: This is not the failure of the two-language formula per se but of its implementation and the present Indian educational ecosystem.
THREE LANGUAGE FORMULA (KOTHARI COMMISSION 1968) :
First language: It will be the mother tongue or regional language.
Second language: In Hindi speaking states, it will be other modern Indian languages or English. In non-Hindi speaking states, it will be Hindi or English.
Third Language: In Hindi speaking states, it will be English or a modern Indian language. In the non-Hindi speaking state, it will be English or a modern Indian language.
WHY TN OPPOSED HINDI LANGUAGE :
- Language being the vehicle of Culture is protected vociferously by civil society & politicians in the State. Any attempt at diluting the importance of Tamil language is viewed as an attempt at homogenisation of culture.
- An important aspect of the opposition to Hindi imposition is that many in Tamil Nadu see it as a fight to retain English.
- English is seen as a bulwark against Hindi as well as the language of empowerment and knowledge.
- There is an entrenched belief in certain sections of society that the continued attempts to impose Hindi will eventually lead to elimination of English, global link language.
- However, voluntary learning of Hind has never been restricted in the State. The patronage for the 102-year-old Dakshina Bharat Hindi Prachar Sabha, based in Chennai, proves this
- Only compulsion is met with resistance.
IS CRITICISM VALID ?
- Out of necessity, many in the Tamil Nadu State have picked up conversational Hindi to engage with the migrant population that feeds the labour needs of society. Teaching the same in schools is thus not a threat to native language .
- There is this counter-argument that Tamil Nadu is depriving students of an opportunity to learn Hindi, touted as a national link language.
- Unlike the National Education policy-1968 which mandated teaching of Hindi in non-Hindi speaking States, the latest NEP does not explicitly mention the ‘third’ language shall be Hindi.
- This means, apart from Tamil and English, students must learn any one of Indian languages.
CONCLUSION :
If India is really interested in the new education policy capable of creating new generations, Delhi can acquire that vision only by studying the educational ecosystem throughout the world.
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