Does Foreign Investment Really Fosters India's Growth?:Critical View.

                     Narendra Modi came to power by promising fast economic growth to create millions of jobs. So, it is mysterious that he has spent much time on foreign visits and receiving foreign dignitaries like Xi Jinping. Foreign relations matter, but can not create millions of jobs- that requires structural reforms that dynamise Indian investment. Till now, industrial data does not reveal any investment boom.

                    It is claimed that Xi would pledge $100 billion of Chinese investment in India. Actually only $20 billion of deals were signed. The rest was apparently hype.Besides, only tiny proportion translate into actual investment. "The Economic Freedom Of the States of India", an annual report of the Friedrich Naumann Institute shows that  of industrial MoU signed by entrepreneurs in 2010-11, conversion into investment ranged from a low of 3% in Bihar to 18.4 % in Haryana.

                    Xi signed MoU investing in two industrial parks in Gujarat and Maharashtra at a total cost of Rs. 40,000 Cr. This sound exorbitant. Even at 1 Cr per acre, the land cost will be just 2,500 Cr. Top class infrastructure is already available or coming via Golden Quadrilateral and Dedicated Rail Freight Corridor. The China may offer cheap finance, but the huge debt nevertheless has to be serviced by India, so a careful look at costs and relevance is essential.

                    Over 600 SEZ have been approved since 2006, but barely 170 have come up, and these are mostly tiny software SEZs. Many promoters of SEZs have abandoned their projects for want of demand from industrialists, despite tax breaks. Companies setting up units in SEZs have to export more than import, but can sell mainly in the domestic market. Mukesh Ambanis's SEZ in Maha Mumbai lies mostly unfilled and his proposed SEZs in Maha Mumbai and Haryana have been abondoned.

                    Even so, politicians want to create even more industrial parks and corridors. Please, the problem is the lack of a climate that sparks the investment boom, not of parks. Big parks and corridors yield big kickbacks, which is why the Congress was fond of them. Modi is supposed to be different.

                    He went tot Japan and returned with pledge of $35 B in public and private Japanese investment. A Japanese official explained that this was conditional on a good investment climate in India that made such projects viable. Modi will told the same thing when he go to US. 

                    Big foreign investment makes big headlines. Yet India itself has a saving rate of 30% of GDP. It is contributed mainly by households and   unincorporated business. FDI in India is barely 1-2% of GDP. This links to global market and technology, and so is disproportionately useful. But it is not the crucial driver of the growth. That has to be local investment. Above all, It has to be investment by small and medium enterprises, which already contribute more to investment and growth than large corporations.

                    The share of private corporate sector in GDP is less than 18% while that of non-corporate sector is 45%. Yet the corporate sector including foreign companies gets all the glamour and VIP treatment. It gets easy access to credit and equity finance while small and medium enterprises are starved. Economic liberation benefited large businesses most. hence Modi should focus on energising Indian investment and give favorable climate to medium and small enterprises.  

India Bhutan Relations(On the Eve Of New PM's First State Visit)

• History Of This Relations

                   Bhutan has always been desirable buffer state from the perspective of anyone ruling India. The modern history of relations began in 1910 with treaty of Punakha. Bye this treaty Bhutan become almost a protectorate of British India. Means had internal autonomy but not external autonomy.

• Relations after independence

                   India declared that they are natural partners with inseperable future, entered into Treaty Of Friendship And Co-op 1949.Key provisions include-

1. Art.1 of the treaty recognizes that India and Bhutan friendship is for all times to come.It suggest that there shall be perpetual peace and friendship between the two.
2. Art.2 of the treaty suggest that GOI undertakes not to interfere in the internal affairs of Bhutan.

                 The other provisions are similar like treaty with Nepal in context of National treatment for citizens, free trade regime and restrictions w.r.t. importing arms from the third party.

Assessment Of the Treaty:-
a) The purpose of the treaty was not to undermine the sovereignty of Bhutan.
b) There was never strict implementation of the treaty. India-Bhutan relations had considerable trust i.e. the reason India allowed Bhutan to have direct negotiations.  
c) Understanding the aspirations of Govt. of Bhutan,GOI and Bhutan revised the treaty in 2007.(The new treaty ensures that neither of the two countries will allow to use of their territory for the activities which are harmful for security interest of each other.

• Economic Co-operation 

                  Bhutan started FYP on advice of Pandit Nehru. First two were completely financed by India.Later on partially funded by India. The most important area inter alia as hydroelectricity which has now become backbone of Bhutan's economy.(Tala, Chukha and Kurichu are major projects). Planned projects are Mangdecchhu and Punat Sang Chu project.  

• Security Co-operation

                The shining example of this co-op is Operation All Clear against Ulfa in 2003.

CHINA FACTOR:-

                 
                 Recently there has been cause of concern in Indo-Bhutan relations because of China. The former PM of Bhutan met Chinese Premier on the sidelines of Rio+20 Summit in 2012. It was reported that the China is offering a package deal to Bhutan as earliest. India and Bhutan are the two countries with whom boundary dispute with China is pending.China has 19 rounds of talks with Bhutan. The reported package deal offered is land swap deal near Chumbi valley.
                  China has offered comparatively larger area in NW part in exchange of area towards the western borders of Bhutan where China can come very nearer to India(This should be cause of concern for us) .Later on it has been clarified by the Govt. of Bhutan that It has no plan for settlement of dispute with China as a package deal.
                  However it can not be said that to what extent India will be able to maintain its influence given China's against bigger power and hard power.
                 Recent controversy erupted because of GOI's decision to suspend subsidies on kerosene and cooking gas that to during election time in Bhutan. It has been interpreted as retaliatory measure done by India in response to previous govt's very liberal interpretation of the revised treaty and there has been report of Bhutan looking for China's support for non permanent member status in UNSC.
                 With the change in govt in Bhutan, subsidies has been restored and an aid package of $781 million have been gave to Bhutan during PM's visit to India.Prime Minister Sri N. Modi inaugarated the Supreme Court building which was constructed with assistance from GOI amounting to Rs./Nu. 793.545 million.L T Tobgay thanked the GOI for the allocation of Rs. 45 billion for the 11th FYP and Rs 5 billion for the economic stimulus plan of the Royal govt of Bhuatn.