Letters to the editor

Clearing misconceptions

As a retired professor from Erasmus University, now on my seventh visit to your great country, I am amazed and appalled at some basic misconceptions your government propagates on the effects FDI will have on your country. Firstly, the illusive term FDI needs to be understood. 'Foreign' means the US dollar since it is the world reserve currency. 'Direct' means that the foreign company does not need to work through an Indian partner; hence, India will have no control on how and where these funds are used. 'Investment' (this is the biggest misconception) benefits the 'investor'—not where the investments are made! Foreign investors are not giving India a grant; they will take back much, much more than what they invest. Check your RBI website: investments made are always far less than outflows taken out.

In effect, FDI will permit the US to launder its paper money (which has no real value) and convert it to real wealth through such investments. What do you think Walmart and other retail stores will do? Let's say they 'invest' $100mn in India. They will use a small fraction of that for setting up stores, salaries, marketing, etc, and the bulk will be transferred to places like China where they will buy ready-made junk and sell it to the people of India at four times the price. In other words, the US will convert about $320mn from its original $100mn that it 'invested' in India. So, who gains?

It is no secret that money has no place in the economic equation of true wealth—only natural resources, human resources and technology play a part. Further, the so-called reforms that your Prime Minister and finance minister have made in the past, and continue to make, are not reforms. Both are given credit for the reforms of the 90s. This is another misconception. India's debt to the World Bank then was repaid by devaluing your currency (it dropped from 12 to 24 rupees overnight) and by opening the flood gates to McDonald's and the like. I really wish your Prime Minister had insisted on clearing the WB debt through gold and not taking false credit for the so-called reforms.

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