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International economist backs BJP's policies

A renowned international economist has rallied in support of the Bharatiya Janata Party-led coalition government's stand of not allowing the multinationals to set up wholly-owned subsidiaries in India, advocating that a restrictive entry policy towards foreign investment is necessary to help the country's domestic industry.

However, Tea Petrim has cautioned that this support should not take the country back to the protectionist regime that it has left behind.

"It is necessary to support the domestic industry but it is equally necessary to bring it face to face with international competition. Certain policy measures are needed in this direction which includes not allowing 100 per cent owned subsidiaries by foreign companies," Petrim, economic adviser to the Slovenian government, said in New Delhi recently.

The government, she said, should facilitate the setting up of 50:50 joint ventures where the Indian partner has as much stake and say in the company.

Nevertheless, in certain sectors where India lags behind the rest of the world and is in "dire need of technology to upgrade itself," a majority stakeholding to the foreign partner or even 100 per cent owned subsidiaries should be allowed. But a restrictive policy is a must.

This will help the domestic industry keep pace with the rest of the world as well as compete with them on the same platform. "Opening of the economy has to be done in stages," Petrim insisted.

The Indian economy, Petrim stated, is very big and is at the stage of development where it is a market that is looked upon by all the developed countries in the world.

In such a situation, it is necessary for the Indian government to be cautious in not allowing multinationals to plough back profits to their own countries and making some linkages with the foreign companies. "India needs not mergers but linkages by which the technical and managerial knowhow can be brought into the country," she added.

Advocating vertical linkages between Indian and foreign companies, Petrim said the attitude should be to promote partnerships.

A protectionist attitude is good for a while but is damaging if it drags on forever. Countries have to allow foreign investment, otherwise you will be cut off from the rest of the world," she pointed out.

The grip of the government over business and economy should be released gradually. "There is a role for the government to play but not in a direct sense of subsidies and giving high protection to domestic companies" she said, "The role should be of helping companies that are growing to have the fastest possible access to all the technical, technological, and managerial knowhow which today determines the competitiveness of a company in both the domestic as well as the international market."

With time, the government should just play at the macro level, taking care of the money supply, stabilisation, and controlling inflation, she added.

UNI