FDI WILL Act As Pide Piper ?

Indian public waking up to economic benefits of foreign investment
You Have to Analyse How far Following views are correct in Indian Contest?

India's economic scenario before 1991 was guided by a conservative mindset, planning and low growth. The financial sector reforms in 1991 triggered new vistas of growth and technical know-how. India also became active on the global trade front.

Liberalizing the economy and easing restrictions on imports of goods enabled Indian industry to bring in the best technology, machinery and expert support. Economic activities got a big boost and the value of India's economic resources began to unlock.

GDP increased manifold, which created scope for bringing in precious financial resources. This came through openings in its capital market to foreign institutional investors for investing in secondary markets and equities, thus revealing the real value of the economic potential of various sectors of the Indian economy and its corporate sector.

All these historic steps created a much larger space for foreign direct investment (FDI) in various sectors. Initially, the Indian government allowed FDI in insurance, banking, non-banking financial companies, telecommunications and townships. These steps resulted in the setting up of a new generation of banks in the private sector and private insurance companies.

The Indian public has gradually accepted the logic of FDI after reaping the benefits of global investments and advanced technology. The capital markets magnified and increased the involvement of retail investors, who started playing in equity sale purchase to book profits.

World famous insurance companies like Allianz, Metlife, Prudential and New York Life brought best global practices and a big basket of multiple products targeting every segment of Indian society. This attracted policy holders even in the lower economic strata of society.

The Indian public has started realizing the enormous benefits of FDI as it has fuelled growth in various sectors.

In 2012, the Indian government announced its policy to open FDI in the retail sector, which at once received a hostile reaction from various political parties.

The government succeeded in getting majority support and in proceeding with its policy agenda. However, it left the decision to allow FDI in retail and opening of giant international retail stores and chains to individual state governments, which can now implement the government's policy as the majority of them are now in favor of it.

There is a general belief that FDI in retail will bring international stores like Walmart, which will result in the eradication of middlemen and exploitation of farmers. It will ensure better prices for their produce and good margins for manufacturing units. Consumers will benefit by getting good products at competitive prices.

There is, however, a perception that FDI in retail will throw small retail owners out of business and take away the livelihoods of millions of workers. As per one estimate, 40 million workers earn their living in India's retail sector. The majority, however, believe that big retail houses will bring in action, vibrancy, dynamism, promote quality and increase employment and skill sets.

Large sections of society feel that the Indian government should widen the base of foreign direct investment and extend it further to cover investments in various other sectors like hydroelectric power, thermal power, irrigation, roads and transport, sea ports and sea transport, the civil aviation and airline industry, commercial real estate and housing projects.

In particular, Indian corporations are strongly pitching for allowing FDI immediately in the civil aviation sector, which is bleeding from its mounting losses.

By and large, society is becoming conscious of the enormous benefits of FDI and believes that it has contributed in supplementing domestic capital requirement, technology and skills to promote economic growth.

It will usher in increased competition by ending the era of monopoly in various segments of the economy. Consumers will have a better shopping experience and a wider range of products.

This will also bring increased employment opportunities and trained human resources who adopt best international practices and service models. It will also ensure increased pay for its work force. All in all, FDI seems to be a safe gamble, even a profitable one.

The author is the executive president of one of the largest private sector banks in India. He is also a visiting professor at the University of Kashmir specializing in Business and Financial studies

http://www.globaltimes.cn/content/755526.shtml

13 JAN, 2013, 11.02PM IST, AP 

Hitting the debt limit: US government to run out of cash?

WASHINGTON: 

In the summer of 2011, when a debt crisis like the current one loomed, President Barack Obama warned Republicans that older Americans might not get their Social Security checks unless there was a deal to raise the nation's borrowing limit. 

After weeks of brinkmanship, Republicans consented and Obama agreed to a deficit-reduction plan the Republicans wanted. Crisis averted, for a time. 

Now that there's a fresh showdown, the possibility of Social Security cuts, and more, is back on the table. 

The government could run out of cash to pay all its bills in full as early as Feb. 15, according to one authoritative estimate, and congressional Republicans want significant spending cuts in exchange for raising the borrowing limit. Obama, forced to negotiate an increase in 2011, has pledged not to negotiate again. 

Without an agreement, every option facing his administration would be unprecedented. 

It would require a degree of financial creativity that could test the law, perhaps even the Constitution. 

It could shortchange Social Security recipients and other people, including veterans and the poor, who rely on government programs. 

It could force the Treasury to contemplate selling government assets, a step considered but rejected in 2011. In short, the Treasury would have to create its own form of triage, creating a priority list of its most crucial obligations, from interest payments to debtors to benefits to vulnerable Americans. 

``It may be that somewhere down the line someone will challenge what the administration did in that moment, but in the moment, who's going to stop them?'' asked Douglas Holtz-Eakin, a former director of the Congressional Budget Office. ``I pray we never have to find out how imaginative they are.'' 

In such a debt crisis, the president would have to decide what laws he wants to break. Does he breach the borrowing limit without a congressional OK? Does he ignore spending commitments required by law? 

In a letter to Obama on Friday, Senate Democratic leaders urged him to consider taking any ``lawful steps that ensure that America does not break its promises and trigger a global economic crisis _ without congressional approval, if necessary.'' 

The White House has resisted that path. It has rejected recommendations that it invoke a provision in the 14th Amendment to the Constitution that states that ``the validity of the public debt of the United States ... shall not be questioned.'' 

``There are only two options to deal with the debt limit: Congress can pay its bills or they can fail to act and put the nation into default,'' White House press secretary Jay Carney said. ``Congress needs to do its job.'' 

So what's left if Congress does not act in time? 

Technically, the government hit the debt ceiling at the end of December. Since then, Treasury Secretary Timothy Geithner has halted full payments into the retirement and disability fund for government workers and to the health benefits fund of Postal Service retirees. 

The Treasury can stop payments to a special fund that purchases or sells foreign currencies to stabilize world financial markets. 

Past administrations have taken such steps to buy time awaiting a debt ceiling increase. That happened under Presidents Bill Clinton and President George W. Bush. The government restored those funds after Congress raised the debt ceiling. 

Those measures and others could keep the government solvent, perhaps as far as early March, according to an analysis by the Bipartisan Policy Center. 

There are other extreme possibilities as well. 

The federal government could sell some of its assets, from its gold stockpile to its student loan portfolio. 

``All these things are in principle marketable, and in a crisis you'd get huge discounts on them,'' said Holtz-Eakin, now head of the American Action Forum, a conservative public policy institute. ``They wouldn't be good ordinary business, but you would be in extraordinary times.'' 

According to a treasury inspector general report last year, department officials in 2011 considered and rejected the idea, concluding that gold sales would destabilize the international financial system, that selling off the student loan portfolio was not feasible and that such ``fire sales'' would buy only limited time. 

An idea pushed by some liberals would take advantage of a legal loophole meant for coin collectors and have the Treasury mint platinum coins that could be deposited at the Federal Reserve and used to pay the nation's bills. But the Treasury issued a statement Saturday putting the idea to rest, saying neither the department nor the Federal Reserve believes the law ``can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit.'' 

Once all efforts are exhausted, then the government would be in uncharted territory. 

At that point, the government would continue to get tax revenue, but hardly enough to keep up with the bills. According to the Bipartisan Policy Center, the federal government between Feb. 15 and March 15 will get $277 billion in revenue and face $452 billion in obligations. 

The Treasury would have to decide whether to pay some obligations and not others or to simply pay for one day's bills as tax revenue rolls in, exponentially delaying payments the longer the debt ceiling is not raised. Under virtually every scenario contemplated, payment of interest on the debt takes precedence to put off a calamitous default. 

``I happen to think the triage would be chosen to create the maximum amount of political pressure to break the impasse right away, which would be withholding Social Security checks,'' said Philip Wallach, a fellow at the Brookings Institution.

http://economictimes.indiatimes.com/news/international-business/hitting-the-debt-limit-us-government-to-run-out-of-cash/articleshow/18010929.cms