FDI in India

For Knowledge Level I :

What is the full form of FDI :
The full form of FDI is Foreign Direct Investment.
What is the meaning of FDI ?
The Foreign Direct Investment means cross border investment made by a resident in one economy in an enterprise in another
economy, with the objective of establishing a lasting interest in the investee economy.
FDI is also described as investment into the business of a country by a company in another country. Mostly the investment is into
production by either buying a company in the target country or by expanding operations of an existing business in that country.
Such investments can take place for many reasons, including to take advantage of cheaper wages, special investment privileges (e.g.
tax exemptions) offered by the country.
Why Countries Seek FDI ?
(a) Domestic capital is inadequate for purpose of economic growth;
(b) Foreign capital is usually essential, at least as a temporary measure, during the period when the capital market is in the process of
development;
(c) Foreign capital usually brings it with other scarce productive factors like technical know how, business expertise and knowledge
What are the major benefits of FDI :
(a) Improves forex position of the country;
(b) Employment generation and increase in production ;
(c) Help in capital formation by bringing fresh capital;
(d) Helps in transfer of new technologies, management skills, intellectual property
(e) Increases competition within the local market and this brings higher efficiencies
(f) Helps in increasing exports;
(g) Increases tax revenues
Why FDI is Opposed by Local People or Disadvantages of FDI :
(a) Domestic companies fear that they may lose their ownership to overseas company
(b) Small enterprises fear that they may not be able to compete with world class large companies and may ultimately be edged out of
business;
(c) Large giants of the world try to monopolise and take over the highly profitable sectors;
(d) Such foreign companies invest more in machinery and intellectual property than in wages of the local people;
(e) Government has less control over the functioning of such companies as they usually work as wholly owned subsidiary of an overseas
company;
Brief Latest Developments on FDI (all sectors including retail):-
2012 October: In the second round of economic reforms, the government cleared amendments to raise the FDI cap
(a) in the insurance sector from 26% to 49%;
(b) in the pension sector it approved a 26 percent FDI;
Now, Indian Parliament will have to give its approval for the final shape,"
2012 - September : The government approved the
(a) Allowed 51% foreign investment in multi-brand retail,
(b) Relaxed FDI norms for civil aviation and broadcasting sectors. FDI cap in Broadcasting was raised to 74% from 49%;
(c) Allowed foreign investment in power exchanges
2011 December :
(i) The Indian government removed the 51 percent cap on FDI into single-brand retail outlets and thus opened the market fully to
foreign investors by permitting 100 percent foreign investment in this area.
For Knowledge Level II
Explain the forms in which business can be conducted by a foreign company in India
A foreign company planning to set up business operations in India may:
Incorporate a company under the Companies Act, 1956, as a Joint Venture or a Wholly Owned Subsidiary.
Set up a Liaison Office / Representative Office or a Project Office or a Branch Office of the foreign company
What is the procedure for receiving Foreign Direct Investment in an Indian company?
An Indian company may receive Foreign Direct Investment under the two routes as given under:
i. Automatic Route
FDI is allowed under the automatic route without prior approval either of the Government or the Reserve Bank of India in all
activities/sectors as specified in the consolidated FDI Policy, issued by the Government of India from time to time.
ii. Government Route
FDI in activities not covered under the automatic route requires prior approval of the Government which are considered by the Foreign
Investment Promotion Board (FIPB), Department of Economic Affairs, Ministry of Finance.
What is Scope of FDI in India? Why World is looking towards India for Foreign Direct Investments :
India is the 3rd largest economy of the world in terms of purchasing power parity and thus looks attractive to the world for FDI. Even
Government of India, has been trying hard to do away with the FDI caps for majority of the sectors, but there are still critical areas
like retailing and insurance where there is lot of opposition from local Indians / Indian companies.
Some of the major economic sectors where India can attract investment are as follows:-
Telecommunications
Apparels
Information Technology
Pharma
Auto parts
Jewelry
Chemicals
In last few years, certainly foreign investments have shown upward trends but the strict FDI policies have put hurdles in the growth in
this sector. India is however set to become one of the major recipients of FDI in the Asia-Pacific region because of the economic
reforms for increasing foreign investment and the deregulation of this important sector. India has technical expertise and skilled
managers and a growing middle class market of more than 300 million and this represents an attractive market.
Background and Recent Developments for FDI in Retail Sector which has raised lot of controversies in political circles :
As part of the economic liberalization process set in place by the Industrial Policy of 1991, the Indian government has opened the
retail sector to FDI slowly through a series of steps:
1995 : World Trade Organisations (WTO) General Agreement on Trade in Services, which includes both wholesale and retailing
services, came into effect
1997 : FDI in cash and carry (wholesale) with 100% rights allowed under the government approval route;
2006 : FDI in cash and carry (wholesale) was brought under automatic approval route; Upto 51% investment in single brand retail
outlet permitted, subject to Press Note 3 (2006 series)
2011 : 100% FDI in Single Brand Retail allowed
2012 : On Sept. 13, Government approved the allowance of 51 percent foreign investment in multi-brand retail, [ It also relaxed FDI
norms for civil aviation and broadcasting sectors]
Name the sectors where FDI is NOT allowed in India, both under the Automatic Route as well as under the Government
Route?
FDI is prohibited under the Government Route as well as the Automatic Route in the following sectors:
i) Atomic Energy
ii) Lottery Business
iii) Gambling and Betting
iv) Business of Chit Fund
v) Nidhi Company
vi) Agricultural (excluding Floriculture, Horticulture, Development of seeds, Animal Husbandry, Pisciculture and cultivation of
vegetables, mushrooms, etc. under controlled conditions and services related to agro and allied sectors) and Plantations activities
(other than Tea Plantations)
vii) Housing and Real Estate business (except development of townships, construction of residential/commercial premises, roads or
bridges to the extent specified in notification
viii) Trading in Transferable Development Rights (TDRs).
ix) Manufacture of cigars , cheroots, cigarillos and cigarettes , of tobacco or of tobacco substitutes.
For Knowledge Level III :
Name the authorities Dealing With Foreign Investment:

(a) Foreign Investment Promotion Board (popularly known as FIPB) : The Board is responsible for expeditious clearance of FDI
proposals and review of the implementation of cleared proposals. It also undertake investment promotion activities and issue and
review general and sectoral policy guidelines;
(b) Secretariat for Industrial Assistance (SIA) : It acts as a gateway to industrial investment in India and assists the entrepreneurs and
investors in setting up projects. SIA also liaison with other government bodies to ensure necessary clearances;
(c) Foreign Investment Implementation Authority (FIIA) : The authority works for quick implementation of FDI approvals and
resolution of operational difficultieis faced by foreign investors;
(d) Investment Commission
(e) Project Approval Board
(f) Reserve Bank of Indi
What are the instruments for receiving Foreign Direct Investment in an Indian company?
Foreign investment is reckoned as FDI only if the investment is made in equity shares , fully and mandatorily convertible preference
shares and fully and mandatorily convertible debentures with the pricing being decided upfront as a figure or based on the formula that
is decided upfront. Any foreign investment into an instrument issued by an Indian company which: gives an option to the investor to
convert or not to convert it into equity or does not involve upfront pricing of the instruments a date would be reckoned as ECB and
would have to comply with the ECB guidelines.
The FDI policy provides that the price/ conversion formula of convertible capital instruments should be determined upfront at the time
of issue of the instruments. The price at the time of conversion should not in any case be lower than the fair value worked out, at the
time of issuance of such instruments, in accordance with the extant FEMA regulations [the DCF method of valuation for the unlisted
companies and valuation in terms of SEBI (ICDR) Regulations, for the listed companies].

What are the Total Inflows of FDI in India :

a. For the FY 2012-13 (for the month of July, 2012) was US$ 1.47 billion.
b. Amount of FDI equity inflows for the financial year 2012-13 (from April 2012 to July 2012) stood at US$ 5.90
billion.
c. Cumulative amount of FDI (from April 2000 to July 2012) into India stood at US$ 176.76 billion
.
FDI Equity Inflows from 2000-2012

S. No
Financial Year
(April March)
Amount of FDI Inflows
%age growth
over previous
year (in terms
of US $)
In Rs, crores
In US$
million

1 2000-01 10733 2463 -
2 2001-02 18654 4065 ( + ) 65 %
3 2002-03 12871 2705 ( - ) 33 %
4 2003-04 10064 2188 ( - ) 19 %
5 2004-05 14653 3219 ( + ) 47 %
6 2005-06 24584 5540 ( + ) 72 %
7 2006-07 56390 12492 (+ )125 %
8 2007-08 98642 24575 ( + ) 97 %
9 2008-09 * 142829 31396 ( + ) 28 %
10 2009-10 # 123120 25834 ( - ) 18 %
11 2010-11 # 88520 19427 ( - ) 25 %
12 2011-12 # (April - January 2012) 122307 26192 -
CUMULATIVE TOTAL (from April 2000 to January 2012) 723367 160096 -

(a) including amount remitted through RBIs-NRI Schemes (2000-2002).
(ii) FEDAI (Foreign Exchange Dealers Association of India) conversion rate from rupees to US dollar applied, on the basis of
monthly average rate provided by RBI (DEAP), Mumbai.
(iii) Variation in equity inflows reported in above Table II-A & II-B for 2006-07, 2007-08, 2008-09, 2009-10 & 2010-11 is due to
difference in reporting of inflows by RBI in their monthly report to DIPP & monthly RBI bulletin.
(IV) # Figures for the years 2009-10, 2010-11 & 2011-12 are provisional subject to reconciliation with RBI.
(V) * An additional amount of US$ 4,035 million pertaining to the year 2008-09, since reported by RBI, has been included in FDI
data base from February 2012.
Which country tops in inflow of FDI Since 2000-2010? Top 5 Countries for FDI :
Country
Iinflow in %
age terms
Inflows in absolute Terms
(million US dollars)
Mauritius 42% 50164
Singapore 9 11275
USA 7 8914
UK 5 6158
Netherlands 4 4968

Majority of the foreign direct investment comes through Mauritius as it enjoys several tax advantages, which works well for
the international investors.
What are the Limits for FDI in different Sectors :
** Note / Caution : The below is only broad categorization and may need fine tuning and updations, For example in Civil Aviation
and Broadcasting there are subcategories with different %ag of FDI allowed. These needs to be checked for further and updated
knowledge.
(a) News About Civil Aviation and Broadcasting can be read from this link.
(b) Second Link for the details can be checked by clicking here
(A) 26% FDI is permitted in
Defence (In July 2013, there has been no change in FDI limit but higher investment may be considered in state of the art
technology production by CCS)
Newspaper and media **
Pension sector (allowed in October 2012 as per cabinet decision)
Courier Services (through automatic route)
Tea Plantation (upto 49% through automatic route; 49-100% through FIPB route)


(B)49% FDI is permitted in :
Banking
Cable network**
DTH **
Infrastructure investment
Telecom
Insurance (in July 2013 it was raised to 49% from 26% subject to Parliament approval)
Petroleum Refining (49% allowed under automatic route)
Power Exchanges (49% allowed under automatic route)
Stock Exchanges, Depositories allowed under automatic route upto 49%

49% (FDI & FII) in power exchanges registered under the Central Electricity Regulatory Commission (Power Market) Regulations
2010 subject to an FDI limit of 26 per cent and an FII limit of 23 per cent of the paid-up capital is now permissible. [Permitted in
September 2012]
(C ) 51% is Permitted in
Multi-Brand Retail (Since September 2012)
Petro-pipelines
(D) 74% FDI is permitted in
Atomic minerals
Science Magazines /Journals
Petro marketing
Coal and Lignite mines
Credit information comanies (raised from 49% to 74% in July, 2013)
(E)100% FDI is permitted in
Single Brand Retail (100% FDI allowed in single brand retail; 49% through automatic route; 49-100% through FIPB)
Advertizement
Airports
Cold-storage
BPO/Call centres
E-commerce
Energy (except atomic)
export trading house
Films
Hotel, tourism
Metro train
Mines (gold, silver)
Petroleum exploration
Pharmaceuticals
Pollution control
Postal service
Roads, highways, ports.
Township
Wholesale trading
Telecom (raised from 74% to 100% in July, 2013 by GoI)
Asset Reconstruction Companies (increased from 74% to 100 in July, 2013. Out of this upto 49% will be under automatic route)

The pros and cons of FDI in retailing
The Cabinet has approved 51 per cent FDI in multi-brand retail, a decision that will allow global mega chains like Wal-Mart, Tesco
and Carrefour to open outlets in India.

The Cabinet also increased the foreign investment (FDI) ceiling to 100 per cent from the present 51 per cent in single-brand retail.

The following are the main issues raised by those in favour of foreign equity in multi-brand retailing and those opposed to it:

Those against:
- It will lead to closure of tens of thousands of mom-and-pop shops across the country and endanger livelihood of 40 million people
- It may bring down prices initially, but fuel inflation once multinational companies get a stronghold in the retail market
- Farmers may be given remunerative prices initially, but eventually they will be at the mercy of big retailers
- Small and medium enterprises will become victims of predatory pricing policies of multinational retailers
- It will disintegrate established supply chains by encouraging monopolies of global retailers

Those in favour:
- It will cut intermediaries between farmers and the retailers, thereby helping them get more money for their produce
- It will help in bringing down prices at retail level and calm inflation
- Big retail chains will invest in supply chains which will reduce wastage, estimated at 40 percent in the case of fruits and vegetables
- Small and medium enterprises will have a bigger market, along with better technology and branding
- It will bring much-needed foreign investment into the country, along with technology and global best-practices
- It will actually create employment than displace people engaged in small stores
- It will induce better competition in the market, thus benefiting both producers and consumers (With IANS inputs)
All you wanted to know about new land acquisition Bill
Govt has issued a document that comprehensively explains the tenets of the Bill
Livemint


First Published: Fri, Aug 30 2013. 12 50 PM IST

Updated: Fri, Aug 30 2013. 01 18 PM IST
Indias new land acquisition Bill, praised in some quarters and reviled in others, is a complex piece of legislation. It was passed by the
Lok Sabha on Thursday and will likely be passed by the Rajya Sabha shortly as well. The government has issued a document
explaining the tenets of the Bill that offers a comprehensive explanation of a law that will change how land is acquired and owners are
compensated in India.
Some frequently asked questions on the land acquisition, resettlement and rehabilitation Bill:
What is the significance of the new title The right to fair compensation and transparency in land acquisition, rehabilitation
and resettlement Bill 2012?
The title of the old law conveyed that its primary purpose was to expedite the acquisition of land. However, the principle objective of
the new Bill is fair compensation, thorough resettlement and rehabilitation of those affected, adequate safeguards for their well-being
and complete transparency in the process of land acquisition. The title has been amended to reflect this.
Why is there a need for a new Bill?
There is unanimity of opinion across the social and political spectrum that the current Law (The Land Acquisition Act 1894) suffers
from various shortcomings. Some of these include:
Forced acquisitions: Under the 1894 legislation once the acquiring authority has formed the intention to acquire a particular plot of
land, it can carry out the acquisition regardless of how the person whose land is sought to be acquired is affected.
No safeguards: There is no real appeal mechanism to stop the process of the acquisition. A hearing (under section 5A) is prescribed
but this is not a discussion or negotiation. The views expressed are not required to be taken on board by the officer conducting the
hearing.
Silent on resettlement and rehabilitation of those displaced: There are absolutely no provisions in the 1894 law relating to the
resettlement and rehabilitation of those displaced by the acquisition.
Urgency clause: This is the most criticised section of the Law. The clause never truly defines what constitutes an urgent need and
leaves it to the discretion of the acquiring authority. As a result almost all acquisitions under the Act invoke the urgency clause. This
results in the complete dispossession of the land without even the token satisfaction of the processes listed under the Act.
Low rates of compensation: The rates paid for the land acquired are the prevailing circle rates in the area which are notorious for
being outdated and hence not even remotely indicative of the actual rates prevailing in the area.
Litigation: Even where acquisition has been carried out the same has been challenged in litigations on the grounds mentioned above.
This results in the stalling of legitimate infrastructure projects.
Recent observations by the Supreme Court: Justice Ganpat Singhvi of the Supreme Court has observed, in the wake of repeated
violations that have come to light over the last few months, that the law has become a fraud. He observed that the law seems to have
been drafted with scant regard for the welfare of the common man.
Another bench of the Supreme Court has echoed this sentiment in its observation that [T] he provisions contained in the Act, of late,
have been felt by all concerned, do not adequately protect the interest of the land owners/persons interested in the land. The Act does
not provide for rehabilitation of persons displaced from their land although by such compulsory acquisition, their livelihood gets
affected To say the least, the Act has become outdated and needs to be replaced at the earliest by fair, reasonable and rational
enactment in tune with the constitutional provisions, particularly, Article 300A of the Constitution. We expect the law making process
for a comprehensive enactment with regard to acquisition of land being completed without any unnecessary delay.
Why does the government need to acquire land for private companies as well as public-private partnership projects?

Photo: Indranil Bhoumik/Mint
Land Records in most parts of the country are fragmented and disorganised. In most cases they havent been updated for decades.
The new law overcomes that by ensuring the Collector updates the land records and also pays up to four times the value to correct any
inaccuracies.
If land is purchased then there are no benefits for livelihood losers who are usually far greater in number than the land owners. This
Bill ensures that they are taken care of and not simply displaced.
The inequality in terms of bargaining power between large-scale corporations and small farmers and other marginalised groups
increases the likelihood of unfair agreements. Contracts tend to be signed in favour of the party negotiating from a greater position of
strength. That is why government is required to bridge the gap and bring balance to this relationship.
A legitimate need for acquisition by the state itself (to build public goods such as roads, schools and hospitals) can be undermined
and stalled by groups with vested interests. If there is no sovereign power to compel these groups, a single individual or group of
individuals can hold a process hostage merely by refusing to part with land. Further, in times of crisis such as war, famine and floods,
coupled with absence of legislation clarifying and guiding the states exercise of eminent domain, situations can emerge jeopardising
human lives.
What are the highlights of the new Bill?
Compensation: Given the inaccurate nature of circle rates, the Bill proposes the payment of compensations that are up to four times
the market value in rural areas and twice the market value in urban areas.
R&R: This is the very first law that links land acquisition and the accompanying obligations for resettlement and rehabilitation. Over
five chapters and two entire Schedules have been dedicated to outlining elaborate processes (and entitlements) for resettlement and
rehabilitation. The Second Schedule in particular outlines the benefits (such as land for land, housing, employment and annuities) that
shall accrue in addition to the one-time cash payments.
Retrospective operation: To address historical injustice the Bill applies retrospectively to cases where no land acquisition award has
been made. Also in cases where the land was acquired five years ago but no compensation has been paid or no possession has taken
place then the land acquisition process will be started afresh in accordance with the provisions of this act.
Multiple checks and balances: A comprehensive, participative and meaningful process (involving the participation of local
Panchayati Raj institutions) has been put in place prior to the start of any acquisition proceeding. Monitoring committees at the
national and state levels to ensure that R&R obligations are met have also been established.
Special safeguards for tribal communities and other disadvantaged groups: No law can be acquired in scheduled areas without the
consent of the Gram Sabhas. The law also ensures that all rights guaranteed under such legislation as the Panchayat (Extension to
Scheduled Areas) Act 1996 and the Forest Rights Act 2006 are taken care of. It has special enhanced benefits (outlined in a dedicated
chapter) for those belonging to Scheduled Castes and Scheduled Tribes.
Safeguards against displacement: The law provides that no one shall be dispossessed until and unless all payments are made and
alternative sites for the resettlement and rehabilitation have been prepared. The Third Schedule even lists the infrastructural amenities
that have to be provided to those that have been displaced.
Compensation for livelihood losers: In addition to those losing land, the Bill provides compensation to those who are dependent on
the land being acquired for their livelihood.
Consent: In cases where PPP projects are involved or acquisition is taking place for private companies, the Bill requires the consent
of no less than 70% and 80% respectively (in both cases) of those whose land is sought to be acquired. This ensures that no forcible
acquisition can take place.
Caps on acquisition of multi-crop and agricultural land: To safeguard food security and to prevent arbitrary acquisition, the Bill
directs states to impose limits on the area under agricultural cultivation that can be acquired.
Return of unutilized land: In case land remains unutilized after acquisition, the new Bill empowers states to return the land either to
the owner or to the State Land Bank.
Exemption from income tax and stamp duty: No income tax shall be levied and no stamp duty shall be charged on any amount that
accrues to an individual as a result of the provisions of the new law.
Share in appreciated land value: Where the acquired land is sold to a third party for a higher price, 40% of the appreciated land value
(or profit) will be shared with the original owners.
How are interests and concerns of farmers protected?

Photo: Indranil Bhoumik/Mint
Retrospective effect: Where awards are made but no compensation has been paid or possession has not been taken, compensation
shall be paid at the rate prescribed under the new Act. Where the Award has not been made the entire process shall be considered to
have lapsed. Also where acquisition has taken place five years prior to the commencement of the new law but no compensation/
possession has taken place the proceedings shall be deemed to have lapsed.
Consent: Prior-consent shall be required from 70% of land losers and those working on government assigned lands only in the case
of public-private partnership projects and 80% in the case of private companies. This consent also includes consent to the amount of
compensation that shall be paid.
Return of unutilized land: Land not used can now be returned to the original owners if the state so decides.
Share in sale of acquired land increased: The share that has to be distributed among farmers in the increased land value (when the
acquired land is sold off to another party) has been set at 40%.
Income-tax Exemption: All amounts accruing under this act have been exempted from income tax and from stamp duty.
Strict restrictions on multi-crop acquisition: The acquisition of agricultural land and multi-crop land has to be carried out as a last
resort. There will be definite restrictions on the extent of acquisition of such land in every state to be determined by the States
concerned.
Safeguards to ensure fair price: Given the way in which market value is to be calculated and the imposition of a solatium of 100%
over and above the amount, the farmers are guaranteed a fair price for their land.
Acquisition only if necessary: The Collector has to make sure that no other unutilized lands are available before he moves to acquire
farm land.
Damage to crops to be included in price: The final award has to include damage to any standing crops which might have been
harmed due to the process of acquisition (including the preliminary inspection).
Share in developed land: In case their land is acquired for urbanization purposes 20% of the developed land will be reserved and
offered to these farmers in proportion to the area of their land acquired and at a price equal to the cost of acquisition and the cost of
development.
Fishing rights: In the case of irrigation or hydel projects, affected families may be allowed fishing rights in the reservoirs.
Additional R&R benefits: Farmers are also entitled to the various rehabilitation and resettlement benefits which are enumerated in
response to question 2.
Time-bound social impact assessment: The Bill mandates a social impact assessment of every project which must be completed
within a period of six months.
What are the rehabilitation and resettlement provisions for farmers, landless and livelihood losers?
Reduced qualifying criteria: To qualify for benefits under this Act the time period has been reduced to three years of dependence (on
the acquired land) from five.
Affected family to include tenants: The definition of affected family includes agricultural labourers, tenants including any form of
tenancy or usufruct right, share-croppers or artisans who may be working in the affected area for three years prior to the acquisition,
whose primary source of livelihood stands affected by the acquisition of land.
Houses for all affected families: All affected families are entitled to a house provided they have been residing in an area for five
years or more and have been displaced. If they choose not to accept the house they are offered a one-time financial grant in lieu of the
same.
Choice of annuity or employment: All affected families are given a choice of annuity or employment;
i. If employment is not forthcoming they are entitled to a one-time grant of Rs.5 lakh per family.
ii. Alternatively they will provided with an annuity payment of Rs.2,000 per month per family for 20 years (this will be adjusted for
inflation).
Subsistence allowance: All affected families which are displaced from the land acquired shall be given a monthly subsistence
allowance equivalent to Rs.3,000 per month for a period of one year from the date of award.
Training and skill development: All affected families are also given training and skill development while being offered employment.
Miscellaneous amounts: All affected families are given multiple monetary benefits such as transport allowance of Rs.50,000 and
resettlement allowance of Rs.50,000.
One-time financial assistance: Each affected family of an artisan, small trader or self-employed person shall get one-time financial
assistance of such amount as the appropriate government may, by notification, specify subject to a minimum of Rs.25,000.
R&R to be completed in all aspects for irrigation projects: In case of acquisition of land for irrigation or hydel project the
rehabilitation and resettlement shall be completed six months prior to submergence of the lands proposed to be so acquired.
Possession upon fulfilment of conditions under Act: The Collector shall take possession of land only ensuring that full payment of
compensation as well as rehabilitation and resettlement entitlements are paid or tendered to the entitled persons within a period of
three months for the compensation and a period of six months for the monetary part of rehabilitation and resettlement entitlements
commencing from the date of the award. However, families will not be displaced from this land till their alternative R&R sites are
ready for occupation.
Time Limit for provision of R&R entitlements: The components of the Rehabilitation and Resettlement Package in the Second and
Third Schedules that relate to infrastructural entitlements shall be provided within a period of 18 months from the date of the award.
How are interests and concerns of scheduled castes and schedules tribes protected?

Photo: HT
Separate chapter: A separate Chapter has been carved out to protect interests of tribals and those belonging to the Scheduled Castes.
Where acquisition does take place it shall be done as a demonstrable last resort.
Approval: As far as possible no acquisition shall take place in the Scheduled Areas. And where such acquisition does take place it
has to be done with the approval/ consent of the local institutions of self-governance (including the autonomous councils where they
exist).
Development plan: A Development Plan has to be prepared laying down the details of procedure for settling land rights due but not
settled and restoring titles of tribals on alienated land by undertaking a special drive together with land acquisition. The Plan must also
contain a programme for development of alternate fuel, fodder and non-timber forest produce resources on non-forest lands within a
period of five years sufficient to meet the requirements of tribal communities as well as the Scheduled Castes.
One-third to be paid up-front: In case of land being acquired from members of the Scheduled Castes or the Scheduled Tribes, at least
one-third of the compensation amount due shall be paid to the affected families at the outset as first instalment and the rest shall
precede the taking over of the possession of the land.
Resettlement in the same scheduled area: The Scheduled Tribes affected families shall be resettled preferable in the same Scheduled
Area in a compact block so that they can retain their ethnic, linguistic and cultural identity.
Land for community: The resettlement areas predominantly inhabited by the Scheduled Castes and the Scheduled Tribes shall get
land, to such extent as may be decided by the appropriate Government free of cost for community and social gatherings.
Alienation of tribal lands to be void: Any alienation of tribal lands or lands belonging to members of the Scheduled Castes in
disregard of the laws and regulations for the time being in force shall be treated as null and void: and in the case of acquisition of such
lands, the rehabilitation and resettlement benefits shall be available to the original tribal land owners or land owners belonging to the
Scheduled Castes.
Fishing rights: The affected Scheduled Tribes, other traditional forest dwellers and the Scheduled Castes families having fishing
rights in a river or pond or dam in the affected area shall be given fishing rights in the reservoir area of the irrigation or hydel projects.
If resettled outside scheduled area then additional benefits: Where the affected families belonging to the Scheduled Castes and the
Scheduled Tribes are relocated outside of the district then they shall be paid an additional twenty-five per cent rehabilitation and
resettlement benefits to which they are entitled in monetary terms along with a one-time entitlement of fifty thousand rupees.
Higher land-for-land area for SCs/STs: In every project those losing land and belonging to the Scheduled Castes or Scheduled Tribes
will be provided land equivalent to land acquired or two-and-a-half acres, whichever is lower (this is higher than in the case of non-
SC/ST affected families)
Additional amounts: In addition to a subsistence amount of rupees 3000 per month for a year (which all affected families get), the
Scheduled Castes and the Scheduled Tribes displaced from Scheduled Areas shall receive an amount equivalent to rupees 50,000.
How are interests and concerns of panchayati raj institutions protected?
SIA in consultation with PRIs: The Social Impact Assessment (SIA) has to be carried out in consultation with the representatives of
the Panchayati Raj Institutions (PRIs). In fact, the appropriate Government is required by the law to ensure adequate representation of
these institutions during the discharge of the process.
SIA reports to be shared: Reports prepared under the Social Impact Assessment are to be shared with these individuals in their local
language along with a summary.
Representation in expert group: The expert group has to have two members belonging to the Panchayati Raj Institutions. This is a
powerful body that has the power to reject a project.
Hearings in all gram sabhas: In case where an affected area involves more than one Gram Panchayat or Municipality, public hearings
shall be conducted in every Gram Sabha where more than twenty five per cent of land belonging to that Gram Sabha is being acquired.
Consultation in compliance with PESA: Consultation with the Gram Sabha in scheduled areas under the Fifth Schedule referred to in
the Constitution shall be in accordance with the provisions of the Provisions of the Panchayats (Extension to the Scheduled Areas)
Act, 1996.
Representation of panchayat chairpersons on R&R committee at project level: The Rehabilitation and Resettlement Committee at
Project Level has to have the chairpersons of the Panchayats located in the affected area or their nominees as representatives.
Panchayat ghars have to be provided as per the list of Infrastructural amenities given in the Third Schedule.
How are states interests and concerns protected?

Photo: Pradeep Gaur/Mint
Only a baseline: The Bill only provides the baseline for compensation and has devised a sliding scale which allows States to fix the
multiplier (which will determine the final award) depending on distance from urban centres.
Choice for return to land bank or owner: Where unutilized land is returned the state can decided whether it goes to the original owner
or to the land bank.
Threshold for private purchase left to government: While the Bill requires the discharge of obligations related to Resettlement and
Rehabilitation (R&R) even in the case of private purchase provided the purchase exceeds a certain threshold, it leaves the said
threshold to the discretion of the state governments.
In extreme cases, equivalent amount for multi-crop land: While the Bill seeks to discourage acquisition of irrigated multi crop or
agricultural land it gives the choice of earmarking how much of such lands should be reserved for protection against acquisition to the
States. Furthermore if no alternative land is available to replace the multi-crop land acquired, the state can instruct the payment of an
equivalent amount.
R&R procedure at discretion of state: The procedure related to the functioning of the R&R committee at project-level has been left to
the state government if the acquisition is by the state.
States free to enact other laws: The state governments are free to enact any law to enhance or add to the entitlements enumerated
under the Bill which confers higher compensation than payable under the Bill or make provisions for rehabilitation and resettlement
which are more beneficial than those provided under the Bill.
How does the compensation mechanism work?
In urban areas there is no multiplier. This means no enhancement of the market value calculated occurs.
However a solatium of 100% (which currently exists at 30%) is imposed on this market value calculated. This solatium amount is a
compensation to ameliorate the pain of forcible acquisition.
In rural areas the multiplier has been left entirely to the discretion of state governments which may range on a sliding scale from 1 to
2 depending on the radial distance from urban centres.
What are the safeguards in the law to ensure food security?
Special provisions have been inserted in the Law to ensure that multi-crop land is acquired only as a last resort.
States are also required to impose limits on the area of agricultural/ multi-crop land that can be acquired in a State. No acquisition of
such lands in excess of that limit can take place.
When acquiring agricultural land, the state has to cultivate an equivalent area of land elsewhere as agricultural land. If they cannot do
this then they must deposit an amount equivalent to its value in an account to be used for the purposes of enhancing food security.
How are investor concerns addressed?
Consent: In the case of public-private partnership projects consent has been reduced from 80% to 70%. In additional only the
consent of land owners is required.
Definition of market value has been amended to ensure that acquisition price doesnt form the basis for compensation calculation in
future acquisitions. Also power has been given to the Collector to not consider transactions which he feels are outliers and not
indicative of true value while calculating market value. Earlier there was a danger of a price-spiral as (a multiple of) price of first
acquisition in an area would go into calculation of land price for any subsequent acquisitions
States given large flexibility: A sliding scale will give states flexibility to fix compensation in rural areas (between two and four
times market value), depending on their distance from urban areas. Earlier compensation in rural areas was to be four times market
value.
Restrictions/thresholds on amount of irrigated multicrop land and net sown area per district or state available for acquisition left to
the discretion of states. Earlier amount of irrigated multi-cropped irrigated land that could be acquired was capped at 5%, and amount
of net sown area that could be acquired was also capped.
Land size thresholds on when R&R on private purchase of land becomes applicable has now been left to the discretion of States.
Earlier R&R on private purchases was to apply to all acquisitions above 100 acres in rural areas and 50 acres in urban areas.
Payment for R&R costs by acquirer made a one-off acquirer to put all monies in an escrow account, and ongoing commitments like
annuities and benefits to be administered by agency established under this Act. Earlier the Buyer would have had to pay and be
involved with R&R infrastructure building until complete, and R&R annuities to perpetuity. However, families will not be displaced
from this land till their alternative R&R sites are ready for occupation.
Collector can be considered appropriate government: In cases where the land sought to be acquired is below a certain threshold then
the Collector can be the acquiring authority.
Why are there 157 amendments being made to this Bill?

It must be understood that most of these amendments are non-consequential in nature. Out of these 157 amendments, 103
amendments are typographical/ definitional, 28 amendments are minor in nature and only 26 Amendments are substantive in nature.
This classification is explained below.
Substantive changes: These are significant changes. They bring about new provisions or thoroughly alter existing provisions on any
area. Example: Changes in quantum of consent required, process for determining compensation etc.
Minor changes: These are changes which are new additions but are of such a nature that they do not alter the provisions of the Bill as
it was originally drafted. Example: adding time limits to existing processes. These do not fundamentally alter the process.
Typographical /nomenclature/ definitional changes: These are minor modifications which correct errors in type or clarify definitions
which already exist. Example: replacing the term project affected persons with project affected families.
What are these 26 substantive amendments?
The 26 substantive amendments are given below. 13 amendments that have been made in accordance with the recommendations of the
standing committee are as follows:
1. Revised definition of public purpose and revised consent requirements: Given the observations made by the standing committee that
the definition of public purpose needed reworking, an amendment has been made which collates the previously scattered definition of
public purpose and streamlines it to make it easier to understand.
2. Restrictions on multi-crop land acquisition left to the states: In response to the recommendations made by the standing committee
that since states better understand the peculiar and unique circumstances in their regions, the fixation of the cap should be left to them,
an amendment has been made to allow state governments to fix the limits on the acquisition of multi-crop land.
3. Restrictions on agricultural land acquisition left to the states: In response to the recommendations made by the standing committee
that since states better understand the peculiar and unique circumstances in their regions, the fixation of the cap should be left to them,
an amendment has been made to allow state governments to fix the limits on the acquisition of agricultural land.
4. Restrictions on private purchase of land left to the states: In response to the recommendations made by the standing committee that
since land purchase falls within the legislative domain of the States they should be allowed to fix the limits of private purchase. If
these limits are crossed then the rehabilitation and resettlement provisions of this law will apply.
5. Second amendment on restriction of private purchase: A second amendment in furtherance of the preceding amendment has been
made to empower states in the fixation of purchase limits.
6. Additional compensation in case of double displacement: A new section has been inserted to provide for additional compensation if
n affected family is displaced twice.
7. Special provisions for scheduled castes and scheduled tribes: Special provisions have been inserted specifically for scheduled castes
and scheduled tribes in the body of the Act. These include greater benefits and enhanced safeguards.
8. Provision for reservation and other benefits: This amendment has been inserted specifically for scheduled castes and scheduled
tribes in the body of the Act in continuation of the previous amendment.
9. State-level monitoring committee: A state-level monitoring committee has been established on the recommendations of the standing
committee to provide supervision over R&R functions.
10. Period for return of unutilized land reduced: The period for the return of unutilized land has been reduced to 5 years from 10 years.
11. unutilized land may be returned to the original owners: An amendment has been made which allows the state governments the
option to return the land to the original owners if they so decide.
12. Extension of the new law to exempted Acts: In response to the recommendation made by the standing committee, an amendment
has been made to extend the provisions of this Act to all the exempted legislations in the fourth schedule within a period of one year of
its commencement.
13. The provisions relating to scheduled castes and scheduled tribes have been removed from the schedule to the law: And bought into
the main legislation as recommended by the Standing Committee.
The 13 amendments have been made in accordance with the recommendation of the group of ministers are as follows:

Photo: Indranil Bhoumik/Mint
1. Deposit of amount in case of acquisition of agricultural land: A new amendment allows states the option, while acquiring
agricultural land, to deposit an amount equivalent to the value of the agricultural land acquired if they are unable to find alternative
land to cultivate in lieu of the acquired agricultural land (this was the original requirement).
2. Retrospective operation: To correct historical injustices, a retrospective clause allowing certain classes of individuals to benefit
from enhanced compensation and rehabilitation and resettlement has been provided for.
3. Revised social impact assessment process: A revised provision for a more thorough social impact assessment process in
consultation with unutilized raj institutions has been drafted.
4. Power to override recommendations of expert group: It was felt by many individuals that a non-elected group of individuals should
not be given final authority over whether acquisition should be allowed to proceed or not. As a result an amendment has been made to
allow the Government concerned to override them but only if they have sufficient reasons that are recorded in writing.
5. New responsibilities for the collector: New amendments have been made to ensure the collector updates the land records so that
compensation can be paid on true and accurate values.
6. Power to appropriate government to raise R&R: An amendment has been made to enable the appropriate government to raise the
rate of rehabilitation and resettlement to take into account for inflation.
7. Power to taking possession only after satisfying obligations: Section 37 which deals with taking possession of the land has been
strengthened to ensure that the collector shall only take possession of the land after ensuring that the compensation/ R&R
responsibilities have been discharged.
8. Waiver of income tax and stamp duty: To further ameliorate the suffering of displaced families, the Act has exempted them from
the payment of income tax and stamp duty for amounts received under this law.
9. Power to divert land in exceptional cases: If land acquired for one purpose cannot be used for that purpose due to an unforeseen
calamity, then the appropriate government may use it for another purpose.
10. Increase in share of appreciated value: If the government after acquiring the land sells it to a third party then 40% of the
appreciated value will be shared with the original owners. This has been increased from 20%.
11. Limit on benefit from sale of acquired land: In addition to the preceding amendment, an additional amendment has been made to
limit this benefit to only the first time the land is sold after acquisition.
12. Multiplier to calculate compensation: Flexibility has been given to the states to fix the multiplier by which the compensation will
be calculated. In other words states can give up to four times the market value but it can be lower if they chose to fix a lower
multiplier.
13. Offer for developed land: A new amendment has been made which provides that in the case of acquisition for urbanisation
purposes, 20% of the developed land will be reserved and offered to the original owners at a price equal to the cost of acquisition and
development.
Pros and Cons of Food Security Bill 2013 and its impact on Indian Economy ?
August 24, 2013 General Discussions, Politics, What you must know 6 Comments
Food Security Bill, or should we name it as Political Security Bill.
Amidst so much political and economic turmoil, launching such a large scale cost involving project doesnt go well with much of our
educated population. This can have far reaching implications on our economy.
Before we discuss any further, let me brief you about Food Security Bill we talking about.
1. Provide food grains to 67% of the population (approx 800 million) at highly subsidized rates.
2. There will be fixed quota per state of grains allotted. Onus is on the respective states to decide the beneficiaries . This can lead to
wide regional disparities as a person not eligible for such great benefits in one state may be eligible in other state.
3. Grains amount to 5 Kg / per person / per month has to be allotted.
4. Women will be made head of the family according to this scheme. This is very positive step.
5. Special maternity benefits : Free Meal for every pregnant and lactating mothers (during pregnancy and 6 months after child
birth).Also, allowance of Rs.6000 will be given in installments as maternity benefits.
6. Special privileges for children under different age groups like free meals etc.
If you want more details about how this scheme will be implemented , please click HERE.
That was all about the features of Food Security Bill. Now lets discuss why general public (I mean proper educated public) and
opposition party is against this bill.
1. Cost of this bill as projected by Govt (UPA) : 1.25 lakh crores which will greatly impact current fiscal deficit.
2. As per honesty in our country is concerned, we all are aware of it. So, no need to say that this system is also prone to much
corruption as number of beneficiaries is to be decided at state level. Corrupt ministers can illegally hoard the grains and make
shortage of grains as an excuse.
3. With such high procurement of grains by govt , little will be left in open market which will lead to demand-supply imbalance and
can lead to rise in prices and hence inflation.
4. As our major exports are of grains, FSB will hamper our exports, leading to more Current account deficit. More CAD means more
rupee fall, means more expensive imports (sply oil used in transportation) , means more inflation.
5. Government will need to borrow high amounts from Banks to finance such huge project. So, banks will be lending more to
government, leaving less for general public which will hamper private sector growth.
Less growth means loss of jobs, less production and that implies more to be imported from outside India (as in case of Coal),
which puts pressure on our foreign exchange and again we get into this vicious circle of a bad thing resulting in another.
6. Narendra Modi had written a letter to PM citing some flaws in this system. You can READ IT HERE.

What could have been better way to handle this ?
1. Government should have let the economy stabilize first. It could have been after elections.
2. Could have been more specific about the beneficiaries at center level.
3. More stringent laws and proper implementation to check corruption specially when poor is involved.
4. Helping poor to earn money rather than directly feeding him by removing stupid labour laws that hinder our manufacturing.
5. Enforcing the GST (Goods and Services Tax.) What is GST ?

In Favor :-
'Right to food' will become a legal right.
This bill helps to eliminate hunger and malnutrition in the country.
Inflation is on the rise, this is the time poor people need food security.
It helps to empower women, as the eldest woman will be the head of the family.
Nutritious food will be given to pregnant and lactating mothers. This will lead to healthier families.
In Against :-
These food grains will be distributed through the already existing PDS (Public Distribution System). This PDS has many
loopholes such as leakages of food grains, corruption etc.
The exact no. of poor is not calculated correctly. Different departments are giving different numbers. And the criteria for
measuring poor people percentage is not upto the mark.
The cost of this bill Rs.1.24 lakh crore will be a burden for the government, and may lead to fiscal deficit.
As most of the food grains will be procured by Govt, exports will reduced, which is a big threat to the economy.
Farmers have to sell their food grains for procurement prices rather than market prices. It will be loss for farmers.
It's better if govt provide them employment rather than providing food.
Small farmers may shift to other crops, as they will get the subsidized food grains. This will reduce the production of food
grains.

On 7th August, 2013, Gujarat Chief Minister Shri Narendra Modi wrote to Prime Minister expressing serious concern with the
National Food Security Ordinance (NFSO) promulgated by the Central Government. He said the Ordinance does not fulfill the basic
objectives of food security.
In his letter, he pointed out major deficiencies in the Ordinance. He stated that in the Ordinance, unworkable statutory
responsibilities have been given to Central and State governments.

Key deficiencies:
Strangely, number of beneficiaries has been fixed in the ordinance without specifying eligibility criteria and fix individual
entitlements. Between different States, there could be wide regional disparities.
Even the Standing Committee of Parliament in January, 2013 recommended that that Government should formulate eligibility
criteria in consultation with the State Governments. Sadly, the Central Government has chosen to ignore the recommendation of the
Parliamentary Committee.
Ordinance proposes to reduce the entitlement of BPL families from 35 kg per family to only 25 kg per average family of 5 persons.
This cannot be the objective of any food security legislation which reduces the entitlement of those who have been identified as
being below the poverty line.
As per the proposed pricing structure for the foodgrain, the BPL family will now have to incur Rs. 85 more per month to avail 35 Kg
foodgrain which they are getting without the Right.
The proposed entitlement of 5 kg per month per person implies the supply of only 165 gm per person per day. Persons involved in
labour intensive activities require about 2,500 calories per day. As 100 gm of food grain gives about 350 calorie, 165 gm would
provide only 500 calories per day which is hardly 20% of ones daily calorie requirements.
Even in the Mid-day Meal scheme, school going children are entitled to about 150 gm of food grain, and 30 gm of dal for one meal
i.e. about 180 gm of grain. As against this, an adult food insecure person is proposed to be given only 165 gm for 2 meals per day.
This does not address even the calorific security, not to talk about nutritional security, which is the main objective of food
security.
On the one hand, Planning Commission has been claiming reduction in the numbers of BPL families but under the Ordinance food
support is provided to about 2/3 of the population. This illogicality requires to be discussed with States.

He said in the letter that poor families have been made food insecure through this Ordinance. He requested the Prime Minister to
call a meeting of Chief Ministers as it concerns both Centre and State Governments with huge implications.

WTO has a point in objecting to Indias food security act
Misunderstandings about the World Trade Organization (WTO) are pervasive.
The media coverage of the recent WTO meetings at Bali has added to the confusion. The bone of contention was the government
procurement of the food grains in India under the National Food Security Act. The final outcome is a stopgap arrangement that
has bought the Indian government some time; most importantly, it does not have to undertake any changes before the
parliamentary elections.
Some people have celebrated this outcome as a victory. Others have bemoaned it as a capitulation.
It is as if it were a zero-sum game. If the US wins, India loses and vice-versa. What does it even mean when we say that India wins
or loses? Is it Indian producers or consumers or both?
Are their interests aligned? Do we have to support the domestic producers in order to protect the poor consumers? What is the
rationale for having a measure such as Aggregate Measure of Support (AMS)?
Are the worries of the US and other like-minded countries totally misplaced? Is there a plausible solution that would allow the
Indian government to build a safety net for the poor without violating the WTO agreements?
The WTOs mission is to dismantle impediments to free trade and this means disallowing special support by governments to thei r
domestic producers. All the member countries have joined the WTO to ensure that their producers will not be at a disadvantage
while competing in the markets of other countries. Therefore, in principle, all member countries would agree with the notion of
limiting the level of support to domestic producers measured by the AMS.

There is, however, a methodological issue. The AMS is calculated as the product of the quantity procured multiplied by the
difference between the procurement price and a fixed external price derived from world prices during 1986-88. It is also limited
to 10% of the value of agricultural output. Given that international prices have increased substantially since 1986-88, it would
make sense to update this benchmark level. Clearly, with such a change in the formula, some cases now judged to be exceeding
the allowable support would then be considered legitimate.
However, even after this change, India may have to be cautious about how high it can set the procurement price. The grain
procurement required for implementing the food security Act is roughly 25% of the annual output. To satisfy the limit of 10% of
the value of the output at the international market price, the procurement price would have to be no more than 50% higher tha n
the market price.
However, the main point of contention is not merely technical. The G33 proposed that procurement from poor farmers should be
exempt from this bound. This would have given a blanket exemption to the price support for the farmers in developing countries
and predictably the US objected. This was the beginning of the argument that erupted at Bali.
Union minister of commerce and industry Anand Sharma argued that India be allowed to exceed the AMS on the grounds that
the present system of government procurement and distribution ensures food security to the poor in India. How valid is this
argument? Are the developed countries opposed to providing support to poor consumers in India?
First, note that the WTO agreements do not inhibit governments from providing consumer support since that does not harm the
interests of producers in other countries. If the Government of India wanted to give direct cash transfers to all the consumers
that it deems qualified to receive them, it would not be a WTO issue. It will also not be a WTO issue if the government procured
the grain at market prices and distributed it cheaply.
It is a WTO issue only because our present system of delivering food subsidy involves producer support. The central government
procures wheat and rice not at market price but at an administered minimum support price (MSP).
There is another WTO issue. Over the last decade it has consistently procured more than it has dispensed through its public
distribution system. The stocks thus have grown way beyond what would be necessary for dampening price volatility. Such
massive stocks are perceived as a threat by other countries because India could be dumping them in the international market.
These are legitimate fears as India is a big player in the world grain market.
By sucking out the supply of grain from the market, excessive stocks are harmful to consumers. The rising MSP locks the countrys
resources disproportionately in grain production at the cost of other foods such as pulses, vegetables and fruits. Thus, if t he WTO
disallows excessive stockpiling, it could hardly be deemed harmful to India as a whole.
The crux of the problem is that in India the support to producers is entangled with the protection for consumers. This need not
remain so.
Ideally, direct cash transfers to consumers would obviate the need for the government getting into the logistics of storage a nd
distribution and provide a more effective safety net for consumers. If the infrastructure of rural banks is not quite ready f or
organising cash transfers, the delivery of food subsidy through fair price shops can continue until such infrastructure is ready.
But there is no need for procuring more than the PDS distribution (plus 5 or 6 Mtons required for other social programmes suc h
as mid-day meals) as long as there are enough reserve stocks maintained for dampening price volatility.
There will be no continuous build up of stocks under this system. The MSP does not have to be as high as it is now. It can serve as
a price floor and typically the market price will be above it.
To sum up, concentration of price support on select few crops and their excessive stockpiling is in nobodys interest. The need is
to disentangle the producer support from the consumer support through cash transfers. This would be a win-win situation par
excellence

FDI in Higher Education: Understanding The Pros And Cons
Higher education in India has lagged behind due to a variety of reasons. According to statistics of 2003-04, hardly 7-8% of the
population is enrolled in the institutes of higher education in the country. Moreover, public expenditure on higher education is just
0.37% of the total GDP. Statistics also show that there has been a 28% decline in expenditure per student in just 12 years!
Higher education has suffered from both quantitative and qualitative constraints. Given the population that we have, the number of
institutes for higher studies is highly inadequate. This has caused a large number of Indian students to look abroad for their higher
studies. In fact, India is one of the largest importer of education at present. In 2004-05 US had 80,466 students from India, higher
than those from any other country. Along with huge outflow of money capital, this also leads to a drain of human capital.
Given this backdrop, the education ministry came up with the proposal of 100% foreign direct investment (FDI) in higher education
in the country, in 2007. This would then allow foreign universities to set up their campuses in India. Since then this topic has been
hotly debated by academicians.
Arguments for the proposal
There is a shortage of funds in higher education sector. And there are not many ways in which this investment in this sector
can be increased domestically.
Since a large number of students go abroad for their higher education, it is sensible to allow foreign universities to set up
their campuses here, in India. This would help in arresting the outflow of monetary and human capital.
Further, foreign higher educational institutes would create competition with the local institutes making them
internationally competitive.
Also FDI in education would create new institutes and infrastructure and generate employment.
Arguments against the proposal
FDI in any field does not have an attached objective of fulfilling social agenda of the welfare state. It is guided by profit and
market. This would result in commoditization of education.
As per past observations, most foreign institutes invest in technical courses which market needs rather than in quality
education and research which is important for creating and developing human resource.
It has also been observed that only 2
nd
and 3
rd
tier universities are interested in setting up their campuses in the country.
Conclusion/ Solution:
There is thus an urgent need to address the deficiencies facing our higher education sector. However, one sided response to it wont
solve the problem. The best option is the middle path. Government should allow foreign universities to invest in education sector
but under strict regulation. It should shortlist the preferred universities for investment and then invite them to set campus in India.
Low grade universities should not be allowed entry in the country. Moreover government should provide incentives to foreign
universities to setup institutes in areas of research and academics, which is much needed in the country. Thus government needs to
act with strictness and discretion in development of higher education.