The Myth Of Foreign Investment Benefits By Jayati Ghosh.

Governments with over-optimistic expectations from foreign direct investment should be aware that it does not necessarily increase employment and can have negative effects on a fragile economy.

ONE of the myths that appears to be indestructible, despite growing evidence to the contrary, is that of the generally positive and desirable nature of foreign direct investment (FDI). It is certainly seen as being preferable to other forms of foreign capital inflow, such as commercial borrowing and portfolio investment. Furthermore, it is considered to be eminently advantageous in its own terms, and something to be actively sought by governments of developing countries. In fact, access to more FDI is now touted as one of the major benefits of the recent economic globalisation, which is supposed to outweigh its many negative effects.

In India, this perception has, if anything, intensified in recent times. Witness the Budget speech of the Finance Minister, in which he announced a reduction on corporate tax paid by foreign companies from 48 per cent to 40 per cent, despite the shocking shortfalls in tax collection in the current year. This concession was explicitly declared to be a means of wooing more FDI into the economy.

Of course, one can quarrel with the Finance Minister's (false) notion that tax concessions will work to attract more FDI into a stagnating economy. But the more fundamental mistake is to assume that it is necessary to attract FDI in whatever form into the economy, and that this justifies tax and other concessions.

An important book by David Woodward (The next crisis? Direct and Equity Investment in Developing Countries; Zed Books, London and New York, 2001) shows just how problematic such an assumption can be. Woodward's book contains a penetrating and occasionally startling analysis that lays bare in a succinct way many of the current myths about FDI.

To start with, Woodward reveals how little we actually know about even the extent of FDI, and especially stocks of FDI, in different countries. It emerges that official data - including those produced by the International Monetary Fund (IMF) and the World Bank - almost certainly underestimate to a substantial extent, the true value of inward FDI stocks and their absolute rate of increase. Far from trying to improve this state of affairs, the Fund and the Bank have promoted the liberalisation of foreign investment regimes, which actually tends to reduce the availability of data and even the possibility of collecting it.

This matters not only because it is useful for a host country to know the exact stocks of inward FDI, but because inadequate assessment of their extent may lead to policy misjudgment and failure to anticipate potential crises. As Woodward points out, the lack of information on the extent of external liabilities contributed to the external debt crisis of the 1980s, and a similar process may be under way with respect to private investment today. Moreover, since FDI is not unambiguously positive, such lack of knowledge of the extent of inward FDI stocks can even be dangerous in other ways.

Consider, for example, the foreign exchange effects of FDI, which are often simplistically assumed to be positive. In actual fact, the foreign exchange effects are much more negative than what emerges from an idealised view of FDI. Woodward shows that positive effects arise only where new productive capacity is created in the export sector, or in very strongly import-substituting sectors. If FDI takes the form of purchase of existing capacity, even in the export sector it will have a negative foreign exchange effect even if export production goes up, unless the productivity of capital increases enough to offset the other increased foreign exchange costs. At lower levels of import substitution, the effects of "greenfield" FDI on new capacity are much more ambiguous, and may be negative.

Similarly, Woodward indicates how misleading it may be to assume that FDI necessarily contributes to increased employment. In fact, the employment effect will depend on a whole range of variables, including the balance between greenfield FDI and the purchase of existing assets; the labour intensity of new productive capacities or new organisational techniques; the extent to which FDI-based production substitutes for existing production and their relative labour intensities, and so on. In general, therefore, it is not the case that FDI creates much more net employment unless it is really very large in scale and heavily involved in greenfield activities, and even in such cases it need not be more employment-intensive.

Large-scale flows of FDI also have effects on other domestic economic policies. To begin with, reliance on such flows imposes severe constraints on domestic government policy because of the fear of withdrawal, and of course the potential impact of disinvestment increases as the FDI stock grows. Further, FDI is embodied in the presence of multinational corporations (MNCs) which tend to be large and powerful lobbies in the matter of domestic policies.

And then, of course, the very competition to attract more FDI by governments with over-optimistic expectations regarding such investment, means that all sorts of concessions are offered, which may turn out to be very expensive for the economy in the medium or long term. Woodward suggests that such FDI promotion tends to focus heavily on the demand side, in terms of requirements imposed on host countries which involve changing their own policies in order to make themselves more attractive. Such unilateral concessions are increasingly sought to be entrenched through international agreements.

Another interesting point that Woodward makes is that much of the over-optimism surrounding foreign investment stems from a tendency to look at the host country in isolation from the developing world as a whole. But in fact there are strong negative spillover effects on other developing countries, which may outweigh whatever limited gains actually do accrue to the host country.

Woodward analyses the 1990s boom in FDI to developing countries, to conclude that it has the elements of a temporary surge similar to those affecting the market for equity (or portfolio) investment. While deregulation of foreign investment across the developing world has played a role, this has probably been less significant than the large-scale privatisation programmes, which have been a major source of both FDI and portfolio investment, and the debt-equity conversions, which were especially common in Latin America. Further, some flight capital may re-enter the country as FDI - some estimates suggest that this has been significant, for example, in China.

All these are clearly short-lived, or temporary forces. Even the globalisation of production can be seen as a finite conversion process, albeit one which is more prolonged and complex. But it is important to note that all these features make FDI, along with portfolio investment, strongly pro-cyclical in nature.

Even worse, FDI can contribute to the underlying fragility of an economy and make it more susceptible to balance of payments crises. Woodward considers several ways in which this can happen. First, as rapidly growing stocks of inward FDI generate similarly growing profits that form part of the foreign exchange outflow. Secondly, when FDI fuels an increase in imports, such as capital goods for investment projects and other such payments. Thirdly, because current foreign exchange costs of MNCs typically exceed the foreign exchange they tend to earn through exports of import substitution. Fourthly, through the role played by foreign affiliates, including those involved in retailing, in changing patterns of consumption through advertising and brand promotion.

For these and other reasons, FDI can contribute to large current account deficits, which tend to precede financial crises. They can also add to both the economic shocks preceding crises and to the process of contagion. Woodward provides examples of a number of East Asian economies and of Mexico prior to their respective financial crises. He does not mention Argentina, whose major crisis broke after this book was published, but it provides an even more classic example of his argument.

The "fire-sale" of domestic productive assets to foreign companies, which often accompanies attempts to come out of such financial crisis, may initially limit the reduction of FDI to the affected countries, as indeed happened in South Korea. But this occurs at a high long-term cost, in terms of the build-up of more FDI stock and further adverse balance of payments effects.

Once again, the case of Argentina over the past two decades provides a stark, if telling, example - indeed, it is almost as if this script were written for Argentina, in terms of the pattern of sale of public assets to foreign multinational companies in the early 1990s, followed by very adverse balance of payments effects which contributed in turn to the external debt build-up, which then precipitated the most recent crisis.

This more pessimistic - and more realistic - view of the impact of FDI provides a very different angle on the substantial and rapidly increasing stocks of inward FDI in a number of developing countries. Far from being a source of celebration, it may in fact be, as Woodward describes it, "an accident waiting to happen". The latest round of crises in emerging markets has perversely operated to strengthen both the positive attitude to FDI and efforts to promote it. But in the new climate, in which developing country markets are seen as riskier and international investors are becoming more risk-averse, efforts to attract more FDI will involve even more concessions on the terms of such investment. "The result will be to accelerate the build-up of liabilities without a commensurate effect on the now seriously limited capacity of national economies to bear them" (page 207) .

In fact, such a crisis appears to be almost inevitable, since any serious efforts to prevent it would require both a change in attitudes to foreign capital and a change in political structures. As Woodward says, "Only when governments represent the interests of their populations and both their business communities, and have (international) political influence proportional to the populations they represent, can we realistically expect to achieve an international financial and economic system which will genuinely serve the interests of people, and not of transnational companies" (page 215).

Until then, it looks as if the world will have to brace itself for the next round of financial crises, this time probably emanating from the balance of payments problems caused by the current adulation of FDI. And we in India will have to bear with further concessions to multinational investment that may not be in our long-term interest, even if such investment does choose to come into the country

Is Wal-Mart what the Doctor Prescribes? By Mohan Guruswamy.

That the Prime Minister of India met Mr. John Menzer, President of Wal-Mart has once again kindled a frenzy of excitement in the pink papers and in the business pages of their white siblings. Not since Kenneth Lay and Rebecca Mark came calling to sell us Enron's plans to lead India out of darkness have we seen such excitement. Enron was a classic con job and what is worrying is that the same people who sold Enron so hard are hard at it selling Wal-Mart. We can be sure that Wal-Mart is no Enron leading us up the garden path. It is a much-respected company whose worldwide sales exceed US$ 255 billion. It is the corporation that has transformed how America shops by giving the average American value for money. Its contribution to the American way of life cannot be any less than that of GM or IBM.

But is Wal-Mart what the good doctor would prescribe for us given our present health condition? Very simply it is all about jobs. Unlike FDI in manufacturing or IT or financial services, all of which create jobs, FDI in retail would entail job losses on a massive scale. The profile of India's retail sector with its overwhelming preponderance of small and self employed retailers is a direct consequence of our inability to provide gainful employment to the millions who join the workforce each year. At last count these numbered about 45 million. These are not just "mom and pop" businesses such as the neighborhood Kirana shop. For every one of them there are dozens of handcart and pavement vendors with little more than a pile of vegetables or fruits as their investment for survival. Food produce accounts for over 14% of all retail trade and most of our small retailers are employed in this sub segment. It is important to remember that most of them are in this business out of necessity and not by choice.

Mr. Menzer himself gave India a fine demonstration of how Wal-Mart gave America value for its money at the lunch for journalists hosted by the US Embassy on May 12, shortly after his happy meeting with Dr.Manmohan Singh. He waved his little black wallet at everyone saying: "We sell this piece, sourced from India, at $17 a piece in the US. Our competitor sells it for $70." Now that is still value for money, considering that Wal-Mart in all probability would have bought that wallet for not more than the equivalent $3. No wonder its consistently big bottom-lines had made its founder Sam Walton the richest man in the world and Warren Buffet its most happy investor. In its quest to give India too value for its money, Wal-Mart will no doubt scour the manufacturing centres of the world and give the Indian consumer goods that are value for money. Right now this means lots of Chinese goods. One must wonder what this will do to our manufacturers of consumer goods?

Wal-Mart is the USA's largest corporation and one of its most profitable. It has been good for America. Wal-Mart is in the business of making profits and it seeks to enter India in search of profits. Unfortunately there are many in this country, and some of them holding high office, who believe that Wal-Mart is carrying a cure for our economic woes. In the last few days it has been argued as to how Wal-Mart, which has 45 stores in China, out sources US$ 20 billion of merchandise from China. By contrast Wal-Mart, they woefully state, only imports only US$ 1 billion of merchandise from India and all Wal-Mart has is a procurement office in Bangalore.

But it is not as if the quantum of Wal-Mart imports are related to the number of stores. Wouldn't Wal-Mart keep importing from China even if it didn't have a single store there? China's exports amount to almost US$ 450 billion whereas India's exports are in the vicinity of US$ 55 billion. This is so because Chinese goods are manufactured to be extremely competitive in terms of price and quality. It is because of this fact, even if China did not have a single Wal-Mart, Wal-Mart would keep importing what it presently does from China. Just as it does what it does from India.

So we must discard this notion that the presence of Wal-Mart stores in India will result in more exports to Wal-Mart in the USA. For that India will have to become a much better and more efficient manufacturer of goods. All kinds of goods. China today is the world's leading exporter of cellular phones, digital cameras, computers, toys and what have you. India leads in H1B visas to the USA. No wonder the Chinese Ambassador in India is able to pithily observe that while India is the office of the world, China is the factory of the world!

How one wishes that people like Dr.Manmohan Singh spent a little more time thinking about how to make India an efficient producer of high value added goods like China has become, rather than on meeting every businessman who wants to set up shop in India. And when was the last time that Dr. Manmohan Singh met representatives of Indian farmers or small retailers or small-scale industry or handloom weavers or construction workers or anybody apart from the representatives of big business like the CII or FICCI?

Now to many of our opinion leaders having the Wal-Mart marquee adorn our urban landscape might be very important. It might even make them feel more at home here? Others might argue that it is the way of the future, while some others can justifiably argue that it will bring better management practices and new technology to shape up our agri-commodity business. One cannot but be skeptical of the argument that Wal-Mart and the likes will give India a cold chain from farm to home, a modern and efficient transportation system that will haul the cauliflower from Betul in Central India to the dinner tables in the big cities.

Assuming that all this happens, and then what will we do about the tens of millions who will become redundant? But if having a handful Wal-Mart's or Tesco's is just another totem of globalization that we must install, like the golden arches of MacDonald's, lets have them. But lets also make sure that they just don't become a conduit for foreign goods. This is important for a company like Wal-Mart will facilitate the entry of foreign goods by eliminating the multiple tiers of the traditional distribution channels in India. This can be easily achieved by insisting that they be foreign exchange neutral, say, for the first ten years.

The Commerce Minister ought to know that we still post a huge trade deficit each year. The only reason we have a reasonable good current account situation is because of "invisibles", which is what we call the remittances sent home by the millions who have been forced overseas by the paucity of jobs in India. The term "Invisibles" is full of irony as it is most appropriate for the remittances of invisible people of India who made it good abroad. But what about the invisible people who are still stranded here?

FDI in Retailing: More Bad than Good By Mohan Guruswamy.

The retail industry in India is of late often being hailed as one of the sunrise sectors in the economy. AT Kearney, the well-known international management consultancy, recently identified India as the 'second most attractive retail destination' from among thirty emergent markets. It has made India the cause of a good deal of excitement and the cynosure of many foreign eyes. With a contribution of 14% to the national GDP and employing 7% of the total workforce or 42 million (only agriculture employs more) in the country, the retail industry is definitely one of the pillars of the Indian economy. Not only is it the largest component of the services sector it is also double the size of the next largest broad economic activity in the services sector.

The retail industry is divided into organized and unorganized sectors. Organized retailing refers to businesses employing more than ten persons and includes the corporate-backed hypermarkets and retail chains. The organized sector accounts for just 2% of the trade and employs just 5 lakh persons. Unorganized retailing refers to the traditional formats of low-cost retailing such as the local kirana shops, owner manned general stores, paan/beedi shops, convenience stores, handcart and pavement vendors, etc and employs over 4 crore persons. Obviously India's retail sector is highly fragmented, with about 11 million outlets operating in the country and only 4% of them being larger than 500 square feet in size. Its greatest contribution is that it is labour intensive. Compare this with an employment of just 0.9 million in the US, yet doing a business more than 13 times of the Indian retail market size.

Estimates vary widely about the true size of the retail business in India. AT Kearney estimated it to be Rs. 4,00,000 crores and poised to double in 2005. On the other hand, if one used the Government's figures the retail trade in 2002-03 amounted to Rs. 3,82,000 crores. One thing all consultants are agreed upon is that the total size of the corporate owned retail business was Rs. 15,000 crores in 1999 and poised to grow to Rs.35, 000 crores by 2005 and keep growing at a rate of 40% per annum.

A simple glance at the employment numbers is enough to paint a good picture of the relative sizes of these two forms of trade in India - organized trade employs roughly 5 lakh people, whereas the unorganized retail trade employs nearly 3.95 crores! According to a GoI study the number of workers in retail trade in 1998 was almost 175 lakhs. Given the recent numbers indicated by other studies, this is only indicative of the magnitude of expansion the retail trade is experiencing, both due to economic expansion as well as the 'jobless growth' that we have seen in the past decade. That about 4% of India's population is in the retail trade says a lot about how vital this business is to the socio-economic equilibrium in India.

Food sales estimated to be 60% of all retail is a very large segment of the total economic activity of our country and due to its vast employment potential, it deserves very special focused attention. Efficiency enhancements and increase in the food retail sales activity would have a cascading effect on employment and economic activity in the rural areas for the marginalized workers. Thus even without FDI driving it, the corporate owned sector is expanding at a furious rate. The question then that arises is that since there is obviously no dearth of indigenous capital, what is the need for FDI? It is not that retailing in India is in the need of any technology special to foreign chains.

But a report prepared by McKinsey & Company and the Confederation of Indian Industry (CII) predicted that global retail giants such as Tesco, Kingfisher, Carrefour and Ahold were waiting in the wings to enter the retail arena. This report also states that the Indian retail market holds the potential of becoming a $300 billion per year market by 2010, provided the sector is opened up significantly. It does not talk about creating additional jobs however, which should be the prime concern of the policy maker.

One of the principal reasons behind the explosion of retail and its fragmented nature in the country is the fact that retailing is probably the primary form of disguised unemployment/underemployment in the country. Given the already over-crowded agriculture sector, and the stagnating manufacturing sector, and the hard nature and relatively low wages of jobs in both, many million Indians are virtually forced into the services sector. Here, given the lack of opportunities, it is almost a natural decision for an individual to set up a small shop or store, depending on his or her means and capital. And thus, a retailer is born, seemingly out of circumstance rather than choice. This phenomenon quite aptly explains the millions of kirana shops and small stores. The explosion of retail outlets in the more busy streets of Indian villages and towns is a visible testimony of this. The presence of more than one retailer for every hundred persons is indicative of the lack of economic opportunities that is forcing people into this form of self-employment, even though much of it is marginal. Because of this fragmentation, the Indian retail sector typically suffers from limited access to capital, labour and real estate options.

As on January 1st of this year, there were 413.88 lakhs job seekers registered at the Employment Exchange. They register at the exchange, to enjoy the benefits and security that a job in the organized sector provides - lifetime employment, pension, and union membership etc. But over the period 1992-93 to 2001-02, only a total of 30,000 jobs have been added in the organized sector in the whole country.

Since jobs are so hard to come by retailing with low capital and infrastructure needs is by far the easiest business to enter, and as such performs a vital function in the economy as an alternative social security net for the unemployed. India, being a free and democratic country, provides its people with this cushion of being able to make a living for oneself through self-employment, as opposed to say China, where the society is highly regulated. In this light, one could brand this sector as one of "forced employment", where the retailer is pushed into it purely because of the paucity of opportunities in other sectors.

Last year the largest retailer in the world 'Wal-Mart' has a turnover of $ 256 bn. and is growing annually at an average of 12-13%. Its net profit was $9 bn. It had 4806 stores employing 1.4 mn persons. Of these 1355 were outside the USA. The average size of a Wal-mart is 85,000 sq.ft and the average turnover of a store was about $ 51 mn. The turnover per employee averaged $ 175,000. In 2004 Wal-Mart had a 9% return on assets and 21% return on equity. By contrast the average Indian retailer's turnover is just Rs. 186,000 and fewer than 4% have shops larger than 500 sq.ft.

Let alone the average Indian retailer in the unorganized sector, no Indian retailer in the organized sector will be able to meet the onslaught from a firm such as Wal-Mart - when it comes. With its incredibly deep pockets Wal-Mart will be able to sustain losses for many years till its immediate competition is wiped out. This is a normal predatory strategy used by large players to drive out small and dispersed competition. This entails job losses by the millions.

India has 35 towns each with a population over 1 million. If Wal-Mart were to open an average Wal-Mart store in each of these cities and they reached the average Wal-Mart performance per store - we are looking at a turnover of over Rs. 80,330 mn with only 935 employees. Extrapolating this with the average trend in India, it would mean displacing about 4,32,000 persons. If large FDI driven retailers were to take 20% of the retail trade, as the now somewhat hard-pressed Hindustan Lever Limited anxiously anticipates, this would mean a turnover of Rs.800 billion on today's basis. This would mean an employment of just 43,540 persons displacing nearly eight million persons employed in the unorganized retail sector.

With possible implications of this magnitude, a great deal of prudence should go into policymaking. Rather we seem to moving towards a policy steamrolled obviously by vested interests acting in concert with the CII & FICCI. In this context we must be concerned about the statement the Finance Minister, Mr. P. Chidambaram, made while making the mid year review for 2004-05. On retail, the review noted that creating an effective supply chain from the producer to the consumer is critical for development of many sectors, particularly processed and semi-processed agro-products. In this context, it says, the role that could be played by organized retail chains, including international ones merits careful attention. Indeed a hard look is called for, but not just through Mr. Chidambaram's eyes.

FDI in Retail: A Question of Jobs, Not Ownership By Kamal Sharma and Jeevan Prakash Mohanty.

AFTER farming, retailing is India's major occupation. It employs 40 million people. A sizeable majority of owner/employees are in the business because of lack of other opportunities. The decade of liberalisation has so far been one of jobless growth. It is no wonder that retail has become the refuge of these millions. Lopsided economic development is transforming India from an agrarian economy directly to a service oriented post-industrial society.

In the Indian perspective, any policy that creates jobs is good policy. Any industry, Indian- or foreign-owned, that generates employment is welcome. The question over foreign direct investment (FDI) in retail is not as much about ownership as about jobs.

The Indian retail industry is highly fragmented. According to AC Nielsen and KSA Technopak, India has the highest shop density in the world. In 2001, it was estimated that there were 11 outlets for every 1000 people. Since the agriculture sector is over-crowded and the manufacturing sector stagnant, millions of young Indians are virtually forced into the service sector. The presence of more than one retailer for every hundred persons is indicative of how many people are being forced into this form of self-employment, despite limitations of capital and space.

Trade/retailing is the single largest component of the services sector in terms of contribution to the gross domestic product. It accounts for 14 per cent of the service sector, i.e., twice that of the next largest economic activity in the sector — banking and insurance. The total number of retail outlets (both food and non-food) was 8.5 million in 1996 and 12 million in 2003, a 41 per cent rise.

The CSO's employment numbers give a comprehensive picture of the importance of this form of livelihood in India. Organised retail trade employs roughly 0.5 million people and unorganised 39.5 million. The fact that about 4 per cent of the population is employed in the unorganised retail trade speaks volumes about how vital this business is to the socio-economic equilibrium in India.

In 2004, Wal-Mart had a turnover of $256 billion and it recorded a net profit of $9 billion. Its 4,806 stores employs 1.4 million persons. The average size of a Wal-Mart outlet is 85,000 square feet and the average turnover about $53 million. The turnover per employee is $1,82,000.

By contrast, the Indian retailer had a turnover of Rs 1,86,075 ($4,100 approximately) and only 4 per cent of the 12 million retail outlets occupied space larger than 500 square feet. The total turnover of the unorganised retail sector, which employs 39.5 million persons, was Rs 735,000 crore. India has 35 towns each with a population of over one million. If Wal-Mart were to open, on an average, one store in each of these 35 cities and if each achieved the average Wal-Mart performance per store, the turnover would amount to over Rs 8,033 crore and number of employees to only 10,195.

Extrapolated to the rest of the country, it would mean displacing around 4,32,000 persons. In other words, every new Wal-Mart employee will render 40 retailers surplus. If FDI retailers with deep pockets were to take over 20 per cent of the retail trade, this would mean a turnover of Rs 1,47,000 crore. This represents an employment of about 43,000 persons, displacing nearly eight million persons in the unorganised retail sector.

The most important argument against modern retailing and supply chain integration is that it displaces labour in a labour-surplus society. Till such time that we are in a position to create jobs on a large scale in manufacturing and construction, it would make eminent sense to keep on hold any policy that results in the elimination of jobs in the unorganised retail sector.

The primary task of the government is still providing livelihoods and not create so-called efficiencies of scale by creating redundancies. If we assume 40 million adults in the retail sector, it would translate into around 160 million dependents. Opening the retailing to FDI means dislocating millions from their occupation and pushing vast number of families under the poverty line. The Western concept of efficiency is maximising output while minimising the number of workers involved. This will only increase social tensions in a developing country like India, where tens of millions are still seeking gainful employment. Companies such as Wal-Mart boast about how they give the consumer better value. Not surprisingly, Wal-Mart procured $20 billion worth of goods from China and just $1 billion worth of goods from India. This is simply because China is a better producer of manufactured goods and not because Wal-Mart has stores there.

Consider a chain such as Wal-Mart with a single point of procurement entering India. Since it already procures huge quantities from China, this make for a massive entry point of China's largely state-owned consumer goods industry into the insatiable market made up of the new consuming elite.

It is true that it is in the consumers' best interest to obtain quality goods and services at the lowest possible price. However, this vocal assertion by the chattering class cannot override the responsibility of any government to provide economic security for its vulnerable population. Countries such as China, Malaysia and Thailand, which have opened their retail sector to FDI in the recent past, have been forced to enact new laws to check the horrific expansion of the new foreign malls and hypermarkets.

In a recent Oxfam study, a decade ago coffee producers earned $10 billion from a global market worth $30 billion. Now they receive less than $6 billion in a global market over $60 billion. Large numbers of producers now interact with monopolistic marketing structures and these chains transfer a large and growing proportion of added value away from producers to companies in industrialised countries.

Neither scale nor efficiency has raised the incomes of the coffee producers. The lessons are clear, bulk procurement plays havoc with producer's margins. Enabling legislation and positive regulation is required to expand our industrial sector whose contribution to employment generation and GDP is much lower than that of the services sector.

The percentage contribution of industry to GDP growth in 1992-96 and in 1997-03 was 30.9 per cent and 23.7 per cent respectively, while for China over roughly the same period it was 62.2 per cent and 58.5 per cent.

We need to address issues at home before we inviting problems from abroad. Vocal proponents of FDI need to ponder a bit more about India's true circumstances.