Having heard the arguments and rebuttals from both ends, I would like to draw your attention upon
the following facts:
Removal of FDI caps leads to increased foreign capital which helps in
1. bridging the domestic “savings-investment” gap.
2. Stabilizing foreign exchange and reducing balance of payment deficit:
a. An inflow of private foreign capital helps in removing deficit in the balance of
payments over time if the foreign-owned enterprise can generate a net positive flow
of export earnings.
3. Realizing estimated tax revenue of government
4. Earnings
a. By taxing the profits of the foreign enterprises we can mobilize greater funds for
projects necessary for economic development
5. Reducing the gap in management, entrepreneurship, technology and skill
What we also need to revise with the removal of FDI caps is the entry route of these foreign direct
investments – ensuring that the Government can have appropriate foresight regarding these.
I believe that our opposition loves data and numbers, so I would like to present some statistical
proofs to back up our points:
In this research paper by Bibhuti Sarker and Farid Khan, they found a long-run relationship between
FDI and GDP.
In another research paper exploring causal interactions between FDI and Economic Growth. The
study analyzed 65 countries with the results indicating a unidirectional causality from FDI to GDP.
But let’s not fix our focus on just research studies, I would further like to direct your attention
towards the economic performance of Singapore, a country with minimal FDI restrictions. Singapore
has a highly liberalized FDI policy which has played a crucial role in its economic growth. Foreign
investment has helped Singapore develop into a global financial hub, drive technological
advancements, and promoted innovation.
Lastly, I would like to conclude by addressing some the pressing issues that might plague my worthy
opponents:
1. National Security: They might say that removing caps gives greater control to foreign entities,
however, even a greater % equity share may give no control if the shares are closely held
among a few stakeholders.
In the US, defense production is in private hands yet the government has a vice-like control
of sale and exports of defense production. So sectoral caps are an ineffective and merely
pose an administrative complexity in clearance of FDI proposals.
the government can in the interest of national security develop a negative list that may be evolved
time to time setting out names of those entities, groups, conglomerates and countries from where
investments may not be allowed at all or may be allowed after sufficient scrutiny.
Empirical trade theorists have now shown that high value-added exports are function of technology
rather than natural or labour resources
One method of bringing in technology is via foreign collaborations or purchase of drawings and
designs. This was the focus of policy during the 1980s in particular. All studies show that this policy
was a complete failure mainly because of the lack of absorptive capacity of domestic manufacturers
either due to the lack of managerial expertise or a trained labour force. In fact, studies show that the
end-result was purchase of outdated technology. Economists will understand this as the "lemon
problem” underpricing of a commodity leads to only "lemons" being sold on the market.
First, the "purchase of technology" route does not provide any spinoff benefits to
domestically-owned companies. In fact, very few technological benefits accrue to even the company
purchasing this technology. What does seem to work, however, is the sheer presence of
foreign-owned firms.
Thus, in areas where there is high FDI presence, domestically-owned firms get substantial benefits in
the form of availability of trained labour or "demonstration effects", which lead to higher
productivity of domestically owned firms
I believe my opponents come not with the thought process of not removing FDI caps but rather not
wanting FDI in the first place.
The artificial restriction on foreign direct investment in electronic news media hurts the growth of
the industry despite the fact that India is home to an abundant pool of human resources. In an age of
internet and social media the cap on FDI on news media does not serve any meaningful purpose
Relatable to isb student
I would like to end by saying what if the bank you borrowed from had a limit saying it would only give
20L instead of