QUESTIONS ASKED DAY-21 (09/08/2013)
1)Discuss the demands and expectations of Indian diaspora in the North America from their host countries. Are these demands justified? Critically examine.
2)“Foreign investment is far from being critical to India’s economic growth”. Critically comment. (2009, GS-II)
RESPONSES:
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“Foreign investment is far from being critical to India’s economic growth”. Critically comment.
Post the 1991 reforms, India has opened up several of its sector to foreign investment and integrated itself more deeply with the international economy.
The foreign investment flowing into India are generally classified as “Foreign Direct Investment” which are long term, and “Foreign Institutional Investment” which are basically portfolio investment and are genrally short term and volatile.
Foreign Direct Investment (FDI) is generally encouraged as it brings in new and better technology, best practices of global management, the much needed capital for infrastructure development and generates employment thus providing impetus to overall development and growth.
However, FDI too isnt without it flaws. Experts argue that foreign companies are generally insensitive to needs of the local environment. They exploit natural resource of the country and drain it’s raw material. Moreover, their intervention in strategic sectors like telecommunication could be a challenge with regard to security concerns.
On the other hand, the portfolio investment done via FII are relatively less benificial as they are considered to be volatile and are very susceptible to the global market trends. Checks need to be in place to ensure that these investments do not destabilize the currency by making a quick flight as happened in the south east asian crisis in the 1990s.
India needs foreign investment at the moment, as the domestic mobilisation of savings is not sufficient to pump in the capital that is needed to sustain the high rate of growth that the country needs to bring its masses out from the clutches of poverty.
The govt needs to provide a stable and enabling policy and legislative framework while ensuring that the domestic needs of the country are not compromised in the zeal to attract to foreign investment.
At the same time, we should also ensure that we do not become completely dependent on foreign investment. Efforts should be sustained parallely to generate domestic capital and entreprenuiral skills so that the country can achieve the desired degree of self sufficiency in case the foreign investments dry up. -
AmudhanDiscuss the demands and Expectation of the Indian Diaspora in North America from their Host countries. Are these demands justified? Critically examine
Indians in the North American countries are predominantly engaged in highly skilled labor unlike Indians on work permits to Singapore or Dubai. These labors in in North America require Job security from their employers and in case of termination a period of respite to find new jobs and stable visa regime.
There have also been demands by the Indian government to provide social security to these workers which flatly refused by US government. Additional the Diaspora wants equal treatment in Taxes and benefits arising from them; and equality in the job selection process along with ability to hold a broader range of jobs.
The US government allows for a highly skilled labor force to come and work but its objectives are not to create to new citizens but procurement of a temporary skilled workforce for its aging population. It is very hard to judge the legitimacy of these since each country treats immigrants according to their own laws and values. The Indian Diaspora as foreigners must abide by them as we expect foreigners to abide by ours. These aspirations can however be reached by Bi-lateral government level talks rather than lobbying by the Diaspora itself. -
Amudhan
“Foreign Investments is far from being critical to India’s economic growth” Critically comment
India’s CAD is currently at levels of 4% and sometimes touching 5% mark. However our balance of payments has been marginally positive, for which we owe some level of stability in our foreign exchange market, is due to foreign investments. India has high savings rate and sufficient domestic capital to meet most of its own demand however in the present context foreign is averting a BOP crisis – concurrent to which economic growth will not happen.
The RBI allowed access to ECB’s for domestic companies during the liquidity crisis which galvanized our growth story through the liquidity crunch however a sizable amount of their foreign loans are due in March 2014, which in the absence of foreign capital will precipitate a BOP crisis and a spiraling exchange rate not auguring well for the economy. Foreign capital also brings in new technology and provides competition.
However some circles point out to a positive cycle triggering this situation where in foreign capital creates a bubble in the real estate and finance markets triggering a wealth effect which increases our imports. Subsequently the rupee will also be overvalued leading to a higher CAD and the need for more capital. In which case we would need lower our dependence on capital and devalue the rupee to appropriate levels and brace for the long haul. Our politicians and the RBI for political and humanistic reasons consideration (33% of our imports is Oil – with a low exchange rate the common man will feel the pinch of price rises) have decided to pursue both in a phased manner in the medium term. -
Anjali MotghareInsights this is my humble request, if u can please frame question by paper wise, topic wise first finish any one paper then start next.
Means it will give a sense of completing one paper and the like. It will also help in collecting data on one paper at a time. Other aspirants needs also be taken care of. Think for larger interest and decide. This my request purely.-
lakshmi prasannasir i to feel the same, pls let us choose a systematic and planned path. so that it fills confidence. thank u
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Ok I will do that. From next week, I will do that but alternately – three days from paper-I and next three days from paper-II, Sunday holiday!
I will see if I can increase number of questions to 3 or 4 (with varying word limits – 250, 150, 50)
But questions won’t be asked topic-wise – they can be asked from any topics within a paper. (if not, it becomes boring, predictable and monotonous, an element of surprise should be there. Also I assume that most of you have covered paper-I and II already in your preparation)
I started this in your interest only – ok, larger interest. Thanks. (You have asked a 5 Star question!)
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Nirmal SinghIndian Diaspora forming a large chunk of population of N.America has a number of issues and demands seeking to be addressed by host country.
Incidents like recent attack on Sikhs through firing on Gurudwara motivated by racial discrimination raises important security raises reservation and need immediate attention. The immigration issue is another area which need reforms considering its discriminatory character and rigid conditions to sponsor one’s relatives. Indians are demanding parity in rights with fellow citizens in certain areas like more Political representation .The denial religious rights and freedom for Muslims and Sikhs is a matter of concern. The low wage migrants suffers from exploitation by employers and especially diplomats abusing diplomatic immunity under Vienna convention. They are demanding grievance redressal measures like ombudsman and helpline to address the same. Related issue is legalisation of undocumentated migrants gaining entry through illegal means.
It is indeed a tragedy that USA and Canada has done little to prevent anti-racial attacks ,turning back to their constitutional obligation to guarantee security to its residents. The approach to minimise immigration considering its influence on demographic transition and economy must be replaced by transparent ,anti discriminatory measures. The religious freedom should be viewed in light for liberal civic rights of which USA is a ardent supporter rather than security needs. The issue of diplomatic abuse is more serious and complex as it is out of their domain and needed to solved through source country negotiations to include provisions for applying host country laws under special circumstances. The ombudsman and helpline would be a good step here. Further issue of legalisation of illegal migrants has no grounds since it is against country laws.
The Diaspora seems to have reasonable and justifiable demands which every country is supposed and must give heed to considering the Diaspora contribution to country economy, human resources and secular credentials-
Anjali Motghare
Nirmal Good answer. Could u please tell me the source for diaspora related data.
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Nirmal Singh
I gathered all data from The Hindu specially opinions over the year.Another good source can be mrunal.com website.He has given excellent strategy for diaspora section.Hope it helps
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shantiForeign investment is needed for any country in two cases. 1) When domestic investment is inadequate. 2) When foreign exchange is required. In domestic investment front, position of India is fairly sound. As for foreign exchange, it can either be an asset or a liability depending on its repatriability. If it is repatriable it is liability foreign exchange else an asset.
This way only three types of foreign exchange can be considered as assets – exchange earned from exports, NRO deposits of NRI’s, foreign aid from other countries or agencies. The rest are liabilities like foreign direct investment (FDI), foreign portfolio investment (FPI), foreign currency loans from other countries etc.
FPI is investment in the capital markets by foreign institutional investors for quick and short term gains. It is called ‘hot money’ or ‘fly by night money’ since it can be withdrawn overnight. FDI is investment in the plant or enterprise by a foreign investor which is part of the paid up capital. It is a debt inflow or a liability foreign exchange because the profits it generates will have to be repatriated in foreign exchange.
Foreign investment should be avoided unless the yields are more than the repayments. . It is not to be forgotten that the South East Asian crisis in 1997 was due to capital flight. In Indian context, in retail sector, if supply side management or technology was what we needed, strengthening these would have been better than opening it to FDI.
No economy ever developed with FDI alone. Sustainable economic growth takes place only when the foreign investment is coupled with domestic technological development and application, indigenous mobilization of resources with the help of government’s support and regulation.-
shanti
Insights,
Sir, its heartening to see your efforts to help us. Thank you.Regarding my answer. It’s one of the first answers i have written. Realised that i havent added many points relevant to India. I should have mentioned CAD atleast. waiting for your review.
Regards
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Shanti,
Your answer is too technical and everything you have mentioned is correct and valid. But it partially answers the question.
Read the question again – the statement simply means that foreign investment is not critical for India’s economic growth. You have to ‘comment’ on this statement ‘critically’. When you are asked to comment, you have to take a stand – either support the statement and strongly defend it, or oppose it and justify it.
So you should make your stand clear in the introduction and give a logical flow to your answer.
This question, though was asked by UPSC in 2009, is very relevant today also(last month we saw easing of FDI norms, increase in capping etc). Going through India’s history – in economic policy making regarding foreign investments – to present scenario and its effect on economic growth, you have to either defend or oppose it. You will get points to justify both stances. Choose one and defend it with reason and logic.
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shanti
Insights,
Your review and others answers gave me a perspective of approaching this answer. But i was clueless when i started to write the answer. Nonetheless i will keep writing. I love the way things are happening here.
Regards.
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lakshmi prasanna
2. During last few decades FDI has become important, as it improves savings and investments for improving production capacity which in turn causes economic development. FDI mostly greater between OECD countries, but recently attracted by developing economies ie BRICS. India started FDI in 1991 through FEMA act. Recent survey revealed India stood in second position after china in attracting FDI. Moreover FDI showed marginal significance in Indian economic growth.
FDI improves economic growth of a country by bringing capital, technology, managerial skills and capacity and access to foreign markets etc. But the host country should have certain conditions like good per capita income, trade openness, educated labor, developed financial markets and absorptive capacity in order to see FDI impact on economic growth.
The survey shows reasons for negative impact of FDI on Indian economic growth. The fact is increase in growth rate of FDI is much higher than GDP growth rate. To absorb this excess FDI inflow employment generation is needed. But unfortunately employment growth rate is lower than FDI growth rate. Resulted high inflation pressure and dropped economic growth. Therefore allowing FDI inflow into economy only cannot warrant economic growth minimal level of economic growth should be there in the economy to absorb the excess FDI inflow.
So government should come up with a policy where FDI enhances domestic production, savings and exports. conclusion is FDI in exports oriented sector is advisable for better economic growth.
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In the introduction OPEC, BRICS is not necessary. You have given valid points like FDI should generate employment, productivity etc. But you are arguing that economic growth is the precondition for attracting FDI. You should have substantiated it further. Also it is wrong that India is receiving ‘excessive’ FDI. Check the data, it is going downhill (not because of low economic growth, but because of government policies). Also, you should mention the name and year of the ‘survey’ you are referring to – gives authenticity to your argument.
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premkumarPaper wise question makes easier to understand it s feels easier to aspirnts like pls consider this request
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phani1) Discuss the demands and expectations of Indian Diaspora in the North America from their host countries. Are these demands justified? Critically examine.
The immigration of Indians to North America particularly USA and Canada has been happening from pre independent times. After independence many people from india belong to all kinds of skill sets migrated to these countries temporarily and permanently. The lucrative idea of “American dream “ and the development of those countries with relatively less accommodation in Indian industry based on their skill set many young IT professionals and especially IIT graduates migrated to north America and are in all walks of life .
Out of total population, though Indians account for only a mere 0.7% , 75% of them continue to held very important positions in both private sector and public life. But they continue to face racial and cultural discrimination in some parts of North America. The recent attacks on Sikh gurudwara in USA are a standing testimony of the racial prejudice of some sections of the American population. Especially in times of economic hurdles and growing unemployment Indians are being seen as the biggest job snatchers. Many students are doing a less than skilled jobs like pizza delivery, working in grocery shops and petrol pumps to meet their ends meet. They do not come under any social security programs. They lose their jobs as and when their employer wishes.
There is a difference in the wages too. A recent study says a Canadian Indian is getting an average income less than 10% of a Canadian though are endowed with the same skill set. With increasing terrorist threats, sometimes Indian Muslims are facing a hard time to clear the immigration checks at the airports is increasing the trust deficit. The NRI’S AND PIO’S expect not less than a fair and equal treatment in employment form countries which boast of equality and freedom. There is a need to increase the trust and value their contributions in the development of north America and constantly pursue the goal of safeguarding them by allying their fears and by providing a social security and stricter punishments against racial discrimination, the onus is on the host countries. -
Vijay PateriyaQUES. Discuss the demands and expectations of Indian diaspora in the N.America from their host country.Are these demands justified?Critically examine.
In this era of globalization when the world is turning into a global village,Indians are also spreading their wings to other countries in search of better prospects.The Indian Diaspora is expanding with time.North America is one of the leading recipient of the Indians because of economic chances and values offered .
But this is not so harmoniously every now and then there comes complaints regarding continous discriminations Indians are being subjected in these countries.The concerning issues broadly refers to 3 categories –
Social security- This covers issues related to attacks on Indians in workplaces or educational institutions on racial lines like Dot busters gang of New jersey.This is currently most burning topic.
Religious issues –like relating to observance of ritual rites by certain religious communities ,for ex.bearing of turban by Sikhs,recent attack on gurudwara.
Economic problems-this relates to problems like job security,wage security etc.
Some other problems raising heads refers to visa problems and providing of basic facilities to Indians.
Pointing to these lithora of problems,Indians in alien countries continues to seek support from their host countries as well as their Homeland.Host countries can try and sort out these problems at their levels by opening helplines ,extending support facilities to Indians ,discussing issues like religious ones with concerned religious heads and home countries through diplomatic channels while at the same time Indians diaspora must refrain from making any demands which prejudices the local laws and rules of the country concerned.On the whole Diasporas could well be a part of devt. Process as it participates in economic prospects and integrations process of the host countries as well thus they must try and protects foreign diasporas within their borders.-
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Vijay Pateriya
sir please …………all of you
any feedbacks
i want to build upon my ability …….humble request-
Second half of the questions is not answered. First half is good. For specific information please have a look at this:http://indiandiaspora.nic.in/diasporapdf/chapter14.pdf(page 188).
Your conclusion is not related to the question or introduction. From introduction to the conclusion the whole answer must flow logically.
After writing each paragraph, have a look at the question. See if your answer is in the right direction and write accordingly. Your answer is good one, but try to make it the best one.
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Nik“Foreign investment is far from being critical to India’s economic growth”. Critically comment.
What got started in the late 80’s had its result in 1991, when India announced itself to be Liberalized, Privatized and Globalized (LPG reforms). The concept was clear in itself to prove India being a part of the Global Village. The doubts, however still hover around whether the foreign investment is critical for India’s economic growth? Certainly, a country’s growth in this era cannot be in isolation. It needs to have the benchmark practices of the world in order to be a real competitor. This is not at all possible unless the foreign players are actively involved in the country.
We cannot deny the fact that our process of industrialization started very late as compared to the developed nations. Idea of getting started from the scratch and development by its own was rejected thoroughly at the time of independence. Help from foreign countries and their companies certainly helped in improving the condition of the people along with improving the economic growth of the country. Adding to it was the era of 1991. Results came slow but steady when India saw the GDP riding at 8% in 11th Five Year Plan.
Yes, the reason was rise in internal demand but had not foreign players been active, fulfilling of demand was not at all possible. Indian rural market as an untapped niche market was also realized by the foreign investment when the companies started selling sachet packets of bigger brands at affordable prices. The overall result not only profited the companies but the Indian economy as a whole.
It is this investment which will bring necessary changes to the infrastructure, logistics support and overall policy framing. Raising doubts about it being critical is like looking backwards to old economic era. Foreign investment has proved itself worthy before and will continue to do so. -
Q Foreign investment is far from being critical to India’s economic growth”. Critically comment
Ans
Foreign Investment may be temporary or permanent. It may be speculation based or industrial based. It is poised to bring foreign currency into an economy thereby bringing economic stability, competition, technology, capital etc. However most of them whether long term or short term, are profit oriented and do not reflect the local demands of the economy.
After 1991 economic reforms, India opened its floodgates for foreign investors. This led to an increase in growth figures in past two decades. Though government opened many sectors in a phased manner, there was not much headway in long term capital inflow, and most was limited to speculative financial markets. In addition to that those who established much awaited industrial base did not bring in the required world class technology. This can be understood from India’s manufacturing base which still constitutes abysmal 14% of GDP which shows reluctance of foreign investors in spurring Indian economic growth.
There has been low investment in infrastructure by foreign companies which require atleast $ 1 trillion during 12 FYP. Further recent lukewarm response and opposition to policy issues by foreign retailers regarding Multi Brand retail trade, which are critical to India’s domestic growth and establishing sound small and medium industries, shows the hawkish attitude. They have advocated for watering down of certain provisions of procurement and back end infrastructure. Most of the funds in financial market are speculative and short term gain oriented leading to destabilization of Indian currency. There is also a lack of CSR on the part of foreign investors.
Hence, despite creating a business friendly environment by the government, foreign investors are least concerned about Indian growth and betting for more liquidation of norms according to their self interest.-
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Nirmal Singh
Hello Sahil
I have few reservations regarding some of your arguments.First it is said there was no technology bought by FDI ,I think it is more to do with government restrictive regulations like cap on FDI. No company will ever pour its hard work of decades of research and billions of money without getting any ownership and say in company decisions which is low thanks to FDI caps.Secondly the government has not created friendly environment so important for Direct Investments .The GARR and DTC code ,not fully convertible rupee and unpredictability in laws ensured Foreign investors will think twice before entering India-
Hey nirmal,
i did not say that fdi brought no technology. i only said it is not upto the global level or of obsolete nature. Many sectors have more than 50% of fdi allowed which provides access to ownership. Secondly, some legislations are in the pipeline for allowing more investment limits. The GAAR provisions may not be clear and government is working on it but it a genuine demand due to unscrupulous use through tax havens. Further GAAR has been in economic circles for the past 1 or 2 years only. Government has opened e Biz window for better facilitation and one window clearances. In addition, funds in the financial markets are completely speculative due to fiscal stimulus in america. the recent volatility in the market proves this.
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Q. Discuss the demands and expectations of Indian Diaspora in the North America from their host countries. Are these demands justified? Critically examine.
Ans
Indian Diaspora is one the major immigrant community in North America especially USA and Canada. Due to lack of opportunities at home, these Indians who are skilled laborers are looking abroad especially in American markets. However lately, there has been a sense of alienation among them due to growing intolerance of the Americans towards outsiders and rising protectionist attitude of the governments.
Most of the Indian population present in America suffers from racial threats, economic constraints and religious fanaticism. This can be seen in context of the racial attacks on students studying in different educational institutions, racial biasness in the period of recession etc. In addition to this our diaspora still demands a level playing field for both domestic and immigrant labor force as most of them, being professionals working in trans frontier companies, are suffering from visa policy regime of US etc. Other issues involve the attacks on religious places like gurudwaras etc. There has been growing concern from community about the rising fanaticism from the indigenous people. This may lead to the rise of religious extremism.
With these concerns Indian diaspora is expecting the host governments to take a pragmatic view of some of their legitimate demands like racial biasness and religious intolerance that are more of a real threat to the very existence of the community which has took the relations between Americans and Indians governments to a new height. However, visa policy regime is more a technical issue with the increasing slowdown in American economy and must be dealt at the inter-governmental level. -
Ashish Mandal“Foreign investment is far from being critical to India’s economic growth”. Critically comment.
Foreign investment, comprising of Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII), in the current environment of economic turmoil in India, is seen as augmenter of economic growth. However, critics argue that foreign investment is no panacea but a toll of neocolonialism.FDI being a stable and much sought investment helps in getting much needed foreign reserves, transfer of technology and generation of employment . FDI also helps in improving quality of goods and services by inducing competition, thus indirectly helps in increasing export potential. Thus, FDI can be said to be helpful in boosting economic growth of a country.
Even FII adds to foreign reserve by bringing global liquidity into the equity markets. FII being non-debt creating flows reduces cost of capital and raises price earning ratio and supplements domestic savings. Thus, FII indicates a positive relationship with the economic growth of a country. Large FII flow often indicates good economic prospects of a country and reinforces further investments.
However, critics point that FII being ‘fly by night’ or ‘hot’ money is a risky and poses potential threat of destabilization of economy due to its nature of short term gains.Even for FDI, it is argued that FDI indulges in cut throat competition and monopoly and is a threat to domestic firms. In long term, profits flow out of country just like colonial ‘economic drain’ and thus can be detrimental to the national interests.
But in India macro-economic concerns of high current account and rupee depreciation calls for foreign investment, as India desperately need foreign currency. FII is no doubt accepted as risky so more focus should be more on FDI, evident from the current FDI policy reforms. Opening up market in new sector will boost economic growth of India as seen in 90s reform especially in telecom sector.
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RVForeign investment in the form of Foreign Direct Investment , FII , QFI are deemed to bring much needed foreign capital , enhance technology transfer and establish world class management and industry competetiveness.
There has been much hue and cry over the recent “tapering” fiasco in the Indian markets and many have questioned the wisdom of foreign Investment citing reasons from low technology transfer to not so efficient management . I find this view myopic and stand by the long term gains the country stands to hold from Foreign Investments .
India is destined to be the global growth engine and for this it requires huge injection into the infrastructure and the capital market which need to be partially sufficed from foreign investment as has been the case in the past. Foreign Investments have undoubtedly brought in competitiveness in the markets thereby reducing the inefficiency if not totally eliminating it and has brought in customer centric good practices.They have shown interest time and again in the Indian bond markets and still hold a considerable weight in that area. The condition of Indian economy had it not been for the 1991 reforms would have been abysmal .
The belief in Foreign Investment has been aptly reflected by the competent authorities like SEBI and RBI which have proposed to ease the norms for foreign Investors and club them into a new profile of Foreign Portfolio Investors and is considering of increasing the avenues for tax benefits to furthen their interest in the Indian market. India would do well to not repeat another Vodafone and bring on amicable legislative and market reforms to augur well in the new era of Indo-China led growth. -
RV
The Indian Diaspora in the North America has been one of the main contributors for their resounding success on all the fronts today. The plethora of success they have achieved as doctors , entrepreneurs , engineers and of late legislators and judges in the U.S. has established them as a strong aspiring community and has filled all Indians with a sense of pride.
However the recent cases of racial discrimination , crackdown on Muslims post 9/11 , increased attacks on Indians and the violent attack on the Gurudwara in Canada , paints a not so rosy picture when it comes to effective protection and grant of rights on equal footing by the host countries . The Indian Diaspora’s demand for greater security both political and socio economic is justified and has rightly been taken up by the Indian Government through bilateral talks. Indian Diaspora also contributes to our economic growth through remittances , NRI deposits and investment in the bond markets and the recent case of Totalisation agreement talks with U.S. shows prudence on our Governments part. The dotting cases of abuse of Diplomatic Immunity especially in case of low wage migrants needs to be taken up at the world forums due to their universal nature under Vienna Convention.
The U.S. and Canadian Governments preaching moral values standing on the high pedestal of being liberal and biggest supporters of civil rights would do well to address these issues . They should realize the importance of the Vikram Pandits , Bobby Jindals and Sunita Williams of the country and the prospect the Gen-next holds for the country which needs their free , peaceful and non-discriminatory environment to realize their full potential. -
For the first question (Indian diaspora in North America), please refer this:http://indiandiaspora.nic.in/diasporapdf/chapter14.pdf (page 188)
Nikku
“Foreign investment is far from being critical to India’s economic growth”. Critically comment.
Post the 1991 reforms, India has opened up several of its sector to foreign investment and integrated itself more deeply with the international economy.
The foreign investment flowing into India are generally classified as “Foreign Direct Investment” which are long term, and “Foreign Institutional Investment” which are basically portfolio investment and are genrally short term and volatile.
Foreign Direct Investment (FDI) is generally encouraged as it brings in new and better technology, best practices of global management, the much needed capital for infrastructure development and generates employment thus providing impetus to overall development and growth.
However, FDI too isnt without it flaws. Experts argue that foreign companies are generally insensitive to needs of the local environment. They exploit natural resource of the country and drain it’s raw material. Moreover, their intervention in strategic sectors like telecommunication could be a challenge with regard to security concerns.
On the other hand, the portfolio investment done via FII are relatively less benificial as they are considered to be volatile and are very susceptible to the global market trends. Checks need to be in place to ensure that these investments do not destabilize the currency by making a quick flight as happened in the south east asian crisis in the 1990s.
India needs foreign investment at the moment, as the domestic mobilisation of savings is not sufficient to pump in the capital that is needed to sustain the high rate of growth that the country needs to bring its masses out from the clutches of poverty.
The govt needs to provide a stable and enabling policy and legislative framework while ensuring that the domestic needs of the country are not compromised in the zeal to attract to foreign investment.
At the same time, we should also ensure that we do not become completely dependent on foreign investment. Efforts should be sustained parallely to generate domestic capital and entreprenuiral skills so that the country can achieve the desired degree of self sufficiency in case the foreign investments dry up.
Would be great if you could give your feedback
Discuss the demands and Expectation of the Indian Diaspora in North America from their Host countries. Are these demands justified? Critically examine
Indians in the North American countries are predominantly engaged in highly skilled labor unlike Indians on work permits to Singapore or Dubai. These labors in in North America require Job security from their employers and in case of termination a period of respite to find new jobs and stable visa regime.
There have also been demands by the Indian government to provide social security to these workers which flatly refused by US government. Additional the Diaspora wants equal treatment in Taxes and benefits arising from them; and equality in the job selection process along with ability to hold a broader range of jobs.
The US government allows for a highly skilled labor force to come and work but its objectives are not to create to new citizens but procurement of a temporary skilled workforce for its aging population. It is very hard to judge the legitimacy of these since each country treats immigrants according to their own laws and values. The Indian Diaspora as foreigners must abide by them as we expect foreigners to abide by ours. These aspirations can however be reached by Bi-lateral government level talks rather than lobbying by the Diaspora itself.
“Foreign Investments is far from being critical to India’s economic growth” Critically comment
India’s CAD is currently at levels of 4% and sometimes touching 5% mark. However our balance of payments has been marginally positive, for which we owe some level of stability in our foreign exchange market, is due to foreign investments. India has high savings rate and sufficient domestic capital to meet most of its own demand however in the present context foreign is averting a BOP crisis – concurrent to which economic growth will not happen.
The RBI allowed access to ECB’s for domestic companies during the liquidity crisis which galvanized our growth story through the liquidity crunch however a sizable amount of their foreign loans are due in March 2014, which in the absence of foreign capital will precipitate a BOP crisis and a spiraling exchange rate not auguring well for the economy. Foreign capital also brings in new technology and provides competition.
However some circles point out to a positive cycle triggering this situation where in foreign capital creates a bubble in the real estate and finance markets triggering a wealth effect which increases our imports. Subsequently the rupee will also be overvalued leading to a higher CAD and the need for more capital. In which case we would need lower our dependence on capital and devalue the rupee to appropriate levels and brace for the long haul. Our politicians and the RBI for political and humanistic reasons consideration (33% of our imports is Oil – with a low exchange rate the common man will feel the pinch of price rises) have decided to pursue both in a phased manner in the medium term.
You are not critically commenting on the statement. Does foreign investment help India’s economic growth or not? I see some ambiguity in your answer.
Insights this is my humble request, if u can please frame question by paper wise, topic wise first finish any one paper then start next.
Means it will give a sense of completing one paper and the like. It will also help in collecting data on one paper at a time. Other aspirants needs also be taken care of. Think for larger interest and decide. This my request purely.
sir i to feel the same, pls let us choose a systematic and planned path. so that it fills confidence. thank u
Ok I will do that. From next week, I will do that but alternately – three days from paper-I and next three days from paper-II, Sunday holiday!
I will see if I can increase number of questions to 3 or 4 (with varying word limits – 250, 150, 50)
But questions won’t be asked topic-wise – they can be asked from any topics within a paper. (if not, it becomes boring, predictable and monotonous, an element of surprise should be there. Also I assume that most of you have covered paper-I and II already in your preparation)
I started this in your interest only – ok, larger interest. Thanks. (You have asked a 5 Star question!)
thank u sir
Thanks a lot Sir !!! ya you are right paper 1 and 2 are already familiar to everyone.
Indian Diaspora forming a large chunk of population of N.America has a number of issues and demands seeking to be addressed by host country.
Incidents like recent attack on Sikhs through firing on Gurudwara motivated by racial discrimination raises important security raises reservation and need immediate attention. The immigration issue is another area which need reforms considering its discriminatory character and rigid conditions to sponsor one’s relatives. Indians are demanding parity in rights with fellow citizens in certain areas like more Political representation .The denial religious rights and freedom for Muslims and Sikhs is a matter of concern. The low wage migrants suffers from exploitation by employers and especially diplomats abusing diplomatic immunity under Vienna convention. They are demanding grievance redressal measures like ombudsman and helpline to address the same. Related issue is legalisation of undocumentated migrants gaining entry through illegal means.
It is indeed a tragedy that USA and Canada has done little to prevent anti-racial attacks ,turning back to their constitutional obligation to guarantee security to its residents. The approach to minimise immigration considering its influence on demographic transition and economy must be replaced by transparent ,anti discriminatory measures. The religious freedom should be viewed in light for liberal civic rights of which USA is a ardent supporter rather than security needs. The issue of diplomatic abuse is more serious and complex as it is out of their domain and needed to solved through source country negotiations to include provisions for applying host country laws under special circumstances. The ombudsman and helpline would be a good step here. Further issue of legalisation of illegal migrants has no grounds since it is against country laws.
The Diaspora seems to have reasonable and justifiable demands which every country is supposed and must give heed to considering the Diaspora contribution to country economy, human resources and secular credentials
Nirmal Good answer. Could u please tell me the source for diaspora related data.
I gathered all data from The Hindu specially opinions over the year.Another good source can be mrunal.com website.He has given excellent strategy for diaspora section.Hope it helps
Thanks Nirmal.
Very good answer.
Foreign investment is needed for any country in two cases. 1) When domestic investment is inadequate. 2) When foreign exchange is required. In domestic investment front, position of India is fairly sound. As for foreign exchange, it can either be an asset or a liability depending on its repatriability. If it is repatriable it is liability foreign exchange else an asset.
This way only three types of foreign exchange can be considered as assets – exchange earned from exports, NRO deposits of NRI’s, foreign aid from other countries or agencies. The rest are liabilities like foreign direct investment (FDI), foreign portfolio investment (FPI), foreign currency loans from other countries etc.
FPI is investment in the capital markets by foreign institutional investors for quick and short term gains. It is called ‘hot money’ or ‘fly by night money’ since it can be withdrawn overnight. FDI is investment in the plant or enterprise by a foreign investor which is part of the paid up capital. It is a debt inflow or a liability foreign exchange because the profits it generates will have to be repatriated in foreign exchange.
Foreign investment should be avoided unless the yields are more than the repayments. . It is not to be forgotten that the South East Asian crisis in 1997 was due to capital flight. In Indian context, in retail sector, if supply side management or technology was what we needed, strengthening these would have been better than opening it to FDI.
No economy ever developed with FDI alone. Sustainable economic growth takes place only when the foreign investment is coupled with domestic technological development and application, indigenous mobilization of resources with the help of government’s support and regulation.
Insights,
Sir, its heartening to see your efforts to help us. Thank you.
Regarding my answer. It’s one of the first answers i have written. Realised that i havent added many points relevant to India. I should have mentioned CAD atleast. waiting for your review.
Regards
Shanti,
Your answer is too technical and everything you have mentioned is correct and valid. But it partially answers the question.
Read the question again – the statement simply means that foreign investment is not critical for India’s economic growth. You have to ‘comment’ on this statement ‘critically’. When you are asked to comment, you have to take a stand – either support the statement and strongly defend it, or oppose it and justify it.
So you should make your stand clear in the introduction and give a logical flow to your answer.
This question, though was asked by UPSC in 2009, is very relevant today also(last month we saw easing of FDI norms, increase in capping etc). Going through India’s history – in economic policy making regarding foreign investments – to present scenario and its effect on economic growth, you have to either defend or oppose it. You will get points to justify both stances. Choose one and defend it with reason and logic.
Insights,
Your review and others answers gave me a perspective of approaching this answer. But i was clueless when i started to write the answer. Nonetheless i will keep writing. I love the way things are happening here.
Regards.
2. During last few decades FDI has become important, as it improves savings and investments for improving production capacity which in turn causes economic development. FDI mostly greater between OECD countries, but recently attracted by developing economies ie BRICS. India started FDI in 1991 through FEMA act. Recent survey revealed India stood in second position after china in attracting FDI. Moreover FDI showed marginal significance in Indian economic growth.
FDI improves economic growth of a country by bringing capital, technology, managerial skills and capacity and access to foreign markets etc. But the host country should have certain conditions like good per capita income, trade openness, educated labor, developed financial markets and absorptive capacity in order to see FDI impact on economic growth.
The survey shows reasons for negative impact of FDI on Indian economic growth. The fact is increase in growth rate of FDI is much higher than GDP growth rate. To absorb this excess FDI inflow employment generation is needed. But unfortunately employment growth rate is lower than FDI growth rate. Resulted high inflation pressure and dropped economic growth. Therefore allowing FDI inflow into economy only cannot warrant economic growth minimal level of economic growth should be there in the economy to absorb the excess FDI inflow.
So government should come up with a policy where FDI enhances domestic production, savings and exports. conclusion is FDI in exports oriented sector is advisable for better economic growth.
sir comment pls is this answer relevant or any drawbacks
In the introduction OPEC, BRICS is not necessary. You have given valid points like FDI should generate employment, productivity etc. But you are arguing that economic growth is the precondition for attracting FDI. You should have substantiated it further. Also it is wrong that India is receiving ‘excessive’ FDI. Check the data, it is going downhill (not because of low economic growth, but because of government policies). Also, you should mention the name and year of the ‘survey’ you are referring to – gives authenticity to your argument.
Ya I read that paper. In third paragraph you have mentioned that – ” The fact is increase in growth rate of FDI is much higher than GDP growth rate” – which gives a wrong idea.
In the link you gave it is said that FDI had negative impact on GDP because India did not generate enough employment during that time period to absorb ‘excess; FDI. (your sentence should have been on this line)
Read this again:
“The negative impact of FDI on GDP is based on the fact that during this period the cumulative growth rate of FDI inflow into the economy was much greater than the cumulative growth rate of GDP. To absorb this higher rate of FDI inflow, immediate translation of FDI into employment generation was very much needed. But, unfortunately, the growth rate employment in the economy during this period was much lesser than the growth rate of FDI. As a result, excess capital inflow into the economy remained unabsorbed, which led to inflationary pressure, whichin turn, ate away the growth in the real sector, establishing a negative impact of FDI on GDP”
The data I talked about is:http://www.thehindu.com/business/Economy/fdi-dips-by-38-to-224-bn-in-201213/article4775276.ece
(I thought you gave your answer citing some very recent survey).
Paper wise question makes easier to understand it s feels easier to aspirnts like pls consider this request
1) Discuss the demands and expectations of Indian Diaspora in the North America from their host countries. Are these demands justified? Critically examine.
The immigration of Indians to North America particularly USA and Canada has been happening from pre independent times. After independence many people from india belong to all kinds of skill sets migrated to these countries temporarily and permanently. The lucrative idea of “American dream “ and the development of those countries with relatively less accommodation in Indian industry based on their skill set many young IT professionals and especially IIT graduates migrated to north America and are in all walks of life .
Out of total population, though Indians account for only a mere 0.7% , 75% of them continue to held very important positions in both private sector and public life. But they continue to face racial and cultural discrimination in some parts of North America. The recent attacks on Sikh gurudwara in USA are a standing testimony of the racial prejudice of some sections of the American population. Especially in times of economic hurdles and growing unemployment Indians are being seen as the biggest job snatchers. Many students are doing a less than skilled jobs like pizza delivery, working in grocery shops and petrol pumps to meet their ends meet. They do not come under any social security programs. They lose their jobs as and when their employer wishes.
There is a difference in the wages too. A recent study says a Canadian Indian is getting an average income less than 10% of a Canadian though are endowed with the same skill set. With increasing terrorist threats, sometimes Indian Muslims are facing a hard time to clear the immigration checks at the airports is increasing the trust deficit. The NRI’S AND PIO’S expect not less than a fair and equal treatment in employment form countries which boast of equality and freedom. There is a need to increase the trust and value their contributions in the development of north America and constantly pursue the goal of safeguarding them by allying their fears and by providing a social security and stricter punishments against racial discrimination, the onus is on the host countries.
Good answer. But you are not answering the second half of the question – whether demands justified? if yes, why? I think their contributions to host countries should be stressed in the conclusion.
QUES. Discuss the demands and expectations of Indian diaspora in the N.America from their host country.Are these demands justified?Critically examine.
In this era of globalization when the world is turning into a global village,Indians are also spreading their wings to other countries in search of better prospects.The Indian Diaspora is expanding with time.North America is one of the leading recipient of the Indians because of economic chances and values offered .
But this is not so harmoniously every now and then there comes complaints regarding continous discriminations Indians are being subjected in these countries.The concerning issues broadly refers to 3 categories –
Social security- This covers issues related to attacks on Indians in workplaces or educational institutions on racial lines like Dot busters gang of New jersey.This is currently most burning topic.
Religious issues –like relating to observance of ritual rites by certain religious communities ,for ex.bearing of turban by Sikhs,recent attack on gurudwara.
Economic problems-this relates to problems like job security,wage security etc.
Some other problems raising heads refers to visa problems and providing of basic facilities to Indians.
Pointing to these lithora of problems,Indians in alien countries continues to seek support from their host countries as well as their Homeland.Host countries can try and sort out these problems at their levels by opening helplines ,extending support facilities to Indians ,discussing issues like religious ones with concerned religious heads and home countries through diplomatic channels while at the same time Indians diaspora must refrain from making any demands which prejudices the local laws and rules of the country concerned.On the whole Diasporas could well be a part of devt. Process as it participates in economic prospects and integrations process of the host countries as well thus they must try and protects foreign diasporas within their borders.
sir please,
corrections and anallysis is welcomed & awaited
thanking you all.
sir please …………all of you
any feedbacks
i want to build upon my ability …….humble request
Second half of the questions is not answered. First half is good. For specific information please have a look at this:http://indiandiaspora.nic.in/diasporapdf/chapter14.pdf(page 188).
Your conclusion is not related to the question or introduction. From introduction to the conclusion the whole answer must flow logically.
After writing each paragraph, have a look at the question. See if your answer is in the right direction and write accordingly. Your answer is good one, but try to make it the best one.
“Foreign investment is far from being critical to India’s economic growth”. Critically comment.
What got started in the late 80’s had its result in 1991, when India announced itself to be Liberalized, Privatized and Globalized (LPG reforms). The concept was clear in itself to prove India being a part of the Global Village. The doubts, however still hover around whether the foreign investment is critical for India’s economic growth? Certainly, a country’s growth in this era cannot be in isolation. It needs to have the benchmark practices of the world in order to be a real competitor. This is not at all possible unless the foreign players are actively involved in the country.
We cannot deny the fact that our process of industrialization started very late as compared to the developed nations. Idea of getting started from the scratch and development by its own was rejected thoroughly at the time of independence. Help from foreign countries and their companies certainly helped in improving the condition of the people along with improving the economic growth of the country. Adding to it was the era of 1991. Results came slow but steady when India saw the GDP riding at 8% in 11th Five Year Plan.
Yes, the reason was rise in internal demand but had not foreign players been active, fulfilling of demand was not at all possible. Indian rural market as an untapped niche market was also realized by the foreign investment when the companies started selling sachet packets of bigger brands at affordable prices. The overall result not only profited the companies but the Indian economy as a whole.
It is this investment which will bring necessary changes to the infrastructure, logistics support and overall policy framing. Raising doubts about it being critical is like looking backwards to old economic era. Foreign investment has proved itself worthy before and will continue to do so.
Q Foreign investment is far from being critical to India’s economic growth”. Critically comment
Ans
Foreign Investment may be temporary or permanent. It may be speculation based or industrial based. It is poised to bring foreign currency into an economy thereby bringing economic stability, competition, technology, capital etc. However most of them whether long term or short term, are profit oriented and do not reflect the local demands of the economy.
After 1991 economic reforms, India opened its floodgates for foreign investors. This led to an increase in growth figures in past two decades. Though government opened many sectors in a phased manner, there was not much headway in long term capital inflow, and most was limited to speculative financial markets. In addition to that those who established much awaited industrial base did not bring in the required world class technology. This can be understood from India’s manufacturing base which still constitutes abysmal 14% of GDP which shows reluctance of foreign investors in spurring Indian economic growth.
There has been low investment in infrastructure by foreign companies which require atleast $ 1 trillion during 12 FYP. Further recent lukewarm response and opposition to policy issues by foreign retailers regarding Multi Brand retail trade, which are critical to India’s domestic growth and establishing sound small and medium industries, shows the hawkish attitude. They have advocated for watering down of certain provisions of procurement and back end infrastructure. Most of the funds in financial market are speculative and short term gain oriented leading to destabilization of Indian currency. There is also a lack of CSR on the part of foreign investors.
Hence, despite creating a business friendly environment by the government, foreign investors are least concerned about Indian growth and betting for more liquidation of norms according to their self interest.
Feedback welcomed…!!!
Hello Sahil
I have few reservations regarding some of your arguments.First it is said there was no technology bought by FDI ,I think it is more to do with government restrictive regulations like cap on FDI. No company will ever pour its hard work of decades of research and billions of money without getting any ownership and say in company decisions which is low thanks to FDI caps.Secondly the government has not created friendly environment so important for Direct Investments .The GARR and DTC code ,not fully convertible rupee and unpredictability in laws ensured Foreign investors will think twice before entering India
Hey nirmal,
i did not say that fdi brought no technology. i only said it is not upto the global level or of obsolete nature. Many sectors have more than 50% of fdi allowed which provides access to ownership. Secondly, some legislations are in the pipeline for allowing more investment limits. The GAAR provisions may not be clear and government is working on it but it a genuine demand due to unscrupulous use through tax havens. Further GAAR has been in economic circles for the past 1 or 2 years only. Government has opened e Biz window for better facilitation and one window clearances. In addition, funds in the financial markets are completely speculative due to fiscal stimulus in america. the recent volatility in the market proves this.
Thanks for clarifications!!
Q. Discuss the demands and expectations of Indian Diaspora in the North America from their host countries. Are these demands justified? Critically examine.
Ans
Indian Diaspora is one the major immigrant community in North America especially USA and Canada. Due to lack of opportunities at home, these Indians who are skilled laborers are looking abroad especially in American markets. However lately, there has been a sense of alienation among them due to growing intolerance of the Americans towards outsiders and rising protectionist attitude of the governments.
Most of the Indian population present in America suffers from racial threats, economic constraints and religious fanaticism. This can be seen in context of the racial attacks on students studying in different educational institutions, racial biasness in the period of recession etc. In addition to this our diaspora still demands a level playing field for both domestic and immigrant labor force as most of them, being professionals working in trans frontier companies, are suffering from visa policy regime of US etc. Other issues involve the attacks on religious places like gurudwaras etc. There has been growing concern from community about the rising fanaticism from the indigenous people. This may lead to the rise of religious extremism.
With these concerns Indian diaspora is expecting the host governments to take a pragmatic view of some of their legitimate demands like racial biasness and religious intolerance that are more of a real threat to the very existence of the community which has took the relations between Americans and Indians governments to a new height. However, visa policy regime is more a technical issue with the increasing slowdown in American economy and must be dealt at the inter-governmental level.
“Foreign investment is far from being critical to India’s economic growth”. Critically comment.
Foreign investment, comprising of Foreign Direct Investment (FDI) and Foreign Institutional Investment (FII), in the current environment of economic turmoil in India, is seen as augmenter of economic growth. However, critics argue that foreign investment is no panacea but a toll of neocolonialism.
FDI being a stable and much sought investment helps in getting much needed foreign reserves, transfer of technology and generation of employment . FDI also helps in improving quality of goods and services by inducing competition, thus indirectly helps in increasing export potential. Thus, FDI can be said to be helpful in boosting economic growth of a country.
Even FII adds to foreign reserve by bringing global liquidity into the equity markets. FII being non-debt creating flows reduces cost of capital and raises price earning ratio and supplements domestic savings. Thus, FII indicates a positive relationship with the economic growth of a country. Large FII flow often indicates good economic prospects of a country and reinforces further investments.
However, critics point that FII being ‘fly by night’ or ‘hot’ money is a risky and poses potential threat of destabilization of economy due to its nature of short term gains.Even for FDI, it is argued that FDI indulges in cut throat competition and monopoly and is a threat to domestic firms. In long term, profits flow out of country just like colonial ‘economic drain’ and thus can be detrimental to the national interests.
But in India macro-economic concerns of high current account and rupee depreciation calls for foreign investment, as India desperately need foreign currency. FII is no doubt accepted as risky so more focus should be more on FDI, evident from the current FDI policy reforms. Opening up market in new sector will boost economic growth of India as seen in 90s reform especially in telecom sector.
Foreign investment in the form of Foreign Direct Investment , FII , QFI are deemed to bring much needed foreign capital , enhance technology transfer and establish world class management and industry competetiveness.
There has been much hue and cry over the recent “tapering” fiasco in the Indian markets and many have questioned the wisdom of foreign Investment citing reasons from low technology transfer to not so efficient management . I find this view myopic and stand by the long term gains the country stands to hold from Foreign Investments .
India is destined to be the global growth engine and for this it requires huge injection into the infrastructure and the capital market which need to be partially sufficed from foreign investment as has been the case in the past. Foreign Investments have undoubtedly brought in competitiveness in the markets thereby reducing the inefficiency if not totally eliminating it and has brought in customer centric good practices.They have shown interest time and again in the Indian bond markets and still hold a considerable weight in that area. The condition of Indian economy had it not been for the 1991 reforms would have been abysmal .
The belief in Foreign Investment has been aptly reflected by the competent authorities like SEBI and RBI which have proposed to ease the norms for foreign Investors and club them into a new profile of Foreign Portfolio Investors and is considering of increasing the avenues for tax benefits to furthen their interest in the Indian market. India would do well to not repeat another Vodafone and bring on amicable legislative and market reforms to augur well in the new era of Indo-China led growth.
The Indian Diaspora in the North America has been one of the main contributors for their resounding success on all the fronts today. The plethora of success they have achieved as doctors , entrepreneurs , engineers and of late legislators and judges in the U.S. has established them as a strong aspiring community and has filled all Indians with a sense of pride.
However the recent cases of racial discrimination , crackdown on Muslims post 9/11 , increased attacks on Indians and the violent attack on the Gurudwara in Canada , paints a not so rosy picture when it comes to effective protection and grant of rights on equal footing by the host countries . The Indian Diaspora’s demand for greater security both political and socio economic is justified and has rightly been taken up by the Indian Government through bilateral talks. Indian Diaspora also contributes to our economic growth through remittances , NRI deposits and investment in the bond markets and the recent case of Totalisation agreement talks with U.S. shows prudence on our Governments part. The dotting cases of abuse of Diplomatic Immunity especially in case of low wage migrants needs to be taken up at the world forums due to their universal nature under Vienna Convention.
The U.S. and Canadian Governments preaching moral values standing on the high pedestal of being liberal and biggest supporters of civil rights would do well to address these issues . They should realize the importance of the Vikram Pandits , Bobby Jindals and Sunita Williams of the country and the prospect the Gen-next holds for the country which needs their free , peaceful and non-discriminatory environment to realize their full potential.
For the first question (Indian diaspora in North America), please refer this:http://indiandiaspora.nic.in/diasporapdf/chapter14.pdf (page 188)
kindly help me by point out my mistakes…. i know still i have done many mistakes but plz guide me regarding where i m lacking now … plz help meeee…
Thank u
sir i expect an assessment from u , this is first time i am writing in insights on India.the initiative is awesome. it has literally created a space for all the interested aspirants to assess and reassess themselves by constantly improving their reasoning skills and honing their journalistic aptitude which i think now a days UPSC is looking for.
FOREIGN INVESTMENT is far from being critical to india’s economic growth.critlcally comment.
Growth of any country largely depends on the volume of its capital formation requring high savings within a country.But on the eve of 1991 Balance of Payment crisis in India,under IMF compulsion it necessiated to liberalise Indian economy thus opening its door wide for global investors to invest in our economy.Foreign Investment i,e. DIRECT and INDIRECT.Direct in terms of ownership and Indirect in terms of investment in shares and stocks.Though policy makers of the land restrained the maximum cap an foreign investors can put into a particular sectorbut very recently, after the recession in world economy in 2008 efforts had been made to enhance the limit with requisite limit on govt -hand.
In this age of economic globalization foreign investment helps to better India’s Balance of Payment scenario,infrastructure ,employment generation in many ways thus paving way for better standard of living of the countrymen.But here one thing we never can ignore that foreign investment is always made with a profit making purpose by the investors thus many a time creating economic unstability by way of flight of capital or capturing local market and generating less than expected profit for the host country.
Therefore ,Indian economy can expect better growth by developing manufacturing and industry sector and improving its service sevtor performance rather than being over- dependent on foreign investment.
Good answer.