Deoghar (Jharkhand) - Resolution-1


10th National Conference, Deoghar (Jharkhand)
11, 12, 13 November, 2011

Foreign Investment An Economic Invasion

Entry of foreign investments in the form of Foreign Direct Investment) FDI) and Foreign Portfolio Investments (FPI) since the introduction of Economic Reforms in 1991 has been causing tremendous damage to our economy for the past 20 years.

FDI has become a tool of taking over the existing successful companies in the guise of brown field investment. The contribution of FDI in creation of employment or in building of infrastructure or in Green Fields Investment is practically negligible. On the other hand, the Government of India is opening the flood gate of FDI in Retail ignoring the recent Report of the Parliamentary Committee led by Dr. Murli Manohar Joshi, which will endanger the small retail shops employing more than 4 crore people of this country. The unbridled entry of FDI is causing not only economic threats but also endangering the national security concerns in certain sensitive sectors of the economy.

The inflow of Foreign Portfolio Investment has destabilized the entire financial sector of our economy. The volatility in the Stock Market, with the hot money flow through Mauritius Route without due identification of the real investors whose names are not disclosed in the Participatory Notes and its illicit nexus with Black Money, Tax heavens and the ill design of recycling of funds generated through illegitimate trade of Narcotics & Drugs is causing serious national security concerns. This is despite the advice of National Security Advisory Committee to SEBI for regularising the FII Investments by disclosing the name of the Investors in the PI notes.

There is an absurd assumption that the capital inflow through FDI / FII Route will hell in mitigating the trade/current account deficit. The trade account deficit of about USD 150 bn and the current account deficit exceeding 3% of GDP is very alarming and may lead to BOP Crisis of much grave nature than the 1990 position when We had to mortgage our gold and this may compel the country to compromise further on its economic sovereignty. The continuous pressure on the trade account and the sudden withdrawal of funds by FIIs from the Stock Market has is weakening the Indian Rupees which has gone down from about Rs. 35 during NDA Rule ( Rupees 16 in 1991) to as low as Rs.50 per USD during the UPA Rule, resulting in devaluation of more than 300% is one of the major cause of imported inflation/price rice in the country during the past two decades. To sum up it can be said that domestic savings which contribute almost 90 percent of the investments in the country needs to be further encouraged with more fiscal and monitory incentives to be given to the domestic investment. The present policy of the Central Govt. with continuous increase in interest rates for the consecutive 13 times through RBI for the so called inflationary control measure for demand management ignoring the supply side management is further dampening the investment climate. The disproportionate dependents on the external sector for export of goods, import of foreign capital an unrestricted imports including China has caused tremendous harm to our domestic industries resulting into huge unemployment problems and affecting our economic development. SJM demands a complete ban on the FDI in Retail and due restriction on FPI inflow by imposition TOBIN tax on the hot money inflow along with the condition for the minimum lock in period of 3 years and regulating the FIIs source of funds in order to break and bust the illegitimate nexus of Black Money and the inflow of Capital in the Stock Market.