Thursday, July 04, 2013

Is Dr Mayaram's FDI prescription an extension of his PhD thesis?

MAYARAM panel report on FDI reforms is the most talked about item in the corridors these day. Whereas the government is likely to go with the recommendations of the panel headed by DEA secretary and 1978 batch IAS Arvind Mayaram, it may face fierce opposition so far as raising the cap of foreign direct investment in telecommunications to 100%,  and FDI in retail and civil aviation to 74%. Interestingly, Mayaram recommendation is an extension of his PhD thesis which he had prepared when he was...
a joint secretary in finance ministry during UPA-I. Current finance minister P Chidambaram was his boss even then. Mayaram got his PhD degree in 2007.
The fundamental issue that he had addressed in his thesis was whether the FDI is good for the Indian economy or not? The question was answered, and situations were analysed on merit and he did not weigh in strong emotional responses towards foreign investment in India. After all,  foreign investment at least till a decade ago did evoke the fears of East India Company revisiting India. As history recorded, the British company landed up in India for pure trade, only to get engaged politically before taking the reins of the country. Mayaram in his thesis had opposed to the slow and reluctant policy responses in India to the rapidly globalizing world.
Who did Mayaram consult when he was preparing his PhD thesis? Dr Dharmendra Bhandari, who was an associate professor of accountancy at the University of Rajasthan and the one who studied taxation of non-residents in India, was his guide. And Dr Gitika Kapoor, Director of Poddar Institute of Management was a co-guide.
Mayaram later acknowledged that his interactions with “luminaries” such as P Chidambaram, deputy chairman, Planning Commission Montek Singh Ahluwalia, Professor Dayakrishna, philosopher professors Suzanne and Lloyd Rudloph of Chicago, former RBI deputy governor Dr Rakesh Mohan and professors Sebastian Morris and Rakesh Basant of IIM Ahmedabad-- all had helped him understand the macro environment in which FDI flows.
Coming back to Mayaram panel report, the argument in favour of raising the FDI caps is based on the following:
a) Modest inflows of FDI in the last two years,
b) Continued pressure on the current account deficit (CAD),
c) The budget announcement regarding rationalization of the definition of FDI and FII.
But will the government succeed in convincing the FDI opponents including some of the heavyweights within the Congress party? Or more importantly, will raising the cap alone ensure getting foreign money? Tips: FDI in retail.

1 comment:

  1. Interesting. But Mr Mayaram must have presented a pro-FDI recommendation taking FM's view into the consideration