Even though the data available proves that India is the Ninth most industrialised country in the world and is emerging as a haven for a range of new industries and IT, the fact of the matter remains that India is a rural country and to break out of the economic straight jacket, it needs to divert its focus towards the natural rural. Undoubtedly, the liberalization of trade policies during the last one decade has led the environment in India to become investor friendly. Most of the industrial and business sectors are today eligible to receive FDI under automatic route and with no ceiling. What are these sectors? What is the objective of FDI? Is there any formal Agenda? Or is it just a rat race or follow the flock principle for merely increasing foreign exchange reserve. Unfortunately, but true as it is, our Government has no clear understanding of the sectors specific in which FDI is being invited; it has no objective or agenda whatsoever except beating other nations in foreign exchange reserve.

If one analyzes the Indian FDI policy, one will notice that its primary focus has been on the manufacturing sector. This fact basically means that India has been allowing foreign investment in those sectors which are restricted to the urban areas. What we need is a regulatory mechanism to channelize the available FDI into areas that have been ignored but have immense potential for growth. India needs to focus on the FDI issues with respect to the rural areas so that they may along with the urban areas reap the benefits of the allocated FDI.

The FDI policies that have been laid down are not rural friendly in any way. Services sector has been ignored since the inception of liberalization. Only, infrastructure projects have been opened up for FDI and that too without proper policy formulation. The 100 percent foreign equity that is permitted in civic infrastructure and private development/construction has been diverted to core urban needs, like Expressways, MRTS, Flyovers, and Hotel Industry to integrated large townships. That would be inclusive of building houses in large numbers to suit the needs of the urban or the suburbs. Our policy makers should incorporate the need todevelop the rural areas as well. The policy that allowed a 100 percent FDI in construction is therefore in my opinion incomplete and it needs to be extended so as to cover the needs of the rural. One essential point, I would like to mention here is FDI in road construction. This genre of construction simply happens to be one of the most expensive. Such elaborate measures are taken to widen the highways or roads that connect the states and towns, but least importance is given to the roads of the villages. This is so because there is no scarcity of funds when it comes to these high traffic movement areas, also the returns that the foreign companies get is quite high in terms of toll charges and that too over a short period of time, proving it to be more lucrative. Hence, such urban and national expressways related BOT projects attract aggressive FDI. What about state roads which connect towns to villages and so on? Because of lack of vehicular traffic in terms of feasibility for success of a BOT project on these roads, these projects have attracted only World Bank funds and not commercial FDI. Our government must basically improve the provisions for investing in the rural areas so that the foreign companies are by design attracted to such propositions.

The other sphere, which needs immediate attention, is that of ‘Retail’. The government of India should recognize the importance of the retailing business and its contribution to the GDP. Government is contemplating to permit FDI in this field, and it will be done within a matter of weeks as are the indications. This needs to be examined keeping the produce of the farmers in mind. The farmers should be given a platform where they can grow better quality crop, fruits and vegetables sothat it may be brought to the retail window. The government needs to ensure investment in bio-tech and agriculture. If FDI is allowed in this sector, the foreign companies would establish large outlets for the sale of the ‘produce’. This would mean better storage facilities and increasing the shelf life of the products. Such kind of a market would also attract many people. One cannot simply treat retailing and shopping in line with the hotels and market complexes; we need to view it from a different angle so that we are able to welcome the rural sector too. There is no government plan for organizing the fruit and vegetable market as done in the case of grains, pulses, oil seeds, wheat paddy etc.

Our policy makers need to look at the situation from another perspective. The existing policies merely, need to be applied differently. We cannot forget that the heart and soul of India lies in its rural areas, so we should take a stopover in the urban but eventually reach the rural.