For a change, I came across an article that made me smile. Clearly, FDI and FII should be welcomed with open arms. Why wouldn’t you?
The FDI investor is bringing his own saved capital and offering to offer it to factor owners to buy the services of their factors and apply them in production. They produce so that they may eventually transform these factors into consumers’ goods that make our lives better. What could be wrong with this idea? Frankly, I see nothing. How on earth does it matter who owns a business? Specifically, how does it matter what the nationality of a business owner is?
On the contrary, we should be grateful that the investor is bringing his capital into this region bringing employment and prosperity in its wake. Investment driven by saved capital is how economies move from primitive conditions to prosperity. I am sure none of us hates prosperity.
While FDI comes in freely, so should FII. What is the logic behind this distinction? It is really absurd to claim (if someone does) that FDI is more valuable than FII. Investment by FII’s into capital markets creates a more robust capital market. FII moves can even become an instant indicator of the wisdom of policy moves. If a policy causes FII’s to move money out en masse, the fault lies with the policy and not with the concept of FII. A lobotomy does not cure a headache, does it? So let’s cure ourselves of the FII-money-is-hot-money-phobia.
While on that point, it is also important to allow Indians to invest freely abroad. The freedom that is given to FDI’s and FII’s should be extended to Indians as well. Why should any of us as individuals not be free to invest in any type of asset anywhere in the world?
In short, this move is a good opportunity to bite the bullet and completely free the movement of capital across the border. Let there be no restrictions on the flow of capital. The only outcome will be a more robust economy and greater prosperity.