How much should India control foreign investment?

Ankur Bhatia is Executive Director of Bird Group, a business conglomerate with diversified interests in travel technology, aviation services, luxury retail, hospitality and education. He is attending the World Economic Forum on India 2012.

India’s opening of its market to foreign investors has brought optimism not only to global players but even more so to Indian consumers and the domestic market. As foreign direct investment (FDI) is allowed into sensitive sectors, government policies and reforms are much debated.

The Indian aviation industry has emerged as a huge market, with massive passenger movement in both domestic and international space. However, looking at the current context, the industry is confronted with prominent challenges that hinder its projected growth. Rising operating costs have completely jeopardized the economies of some airlines today. High operating costs combined with highly competitive market conditions have added to the continued strain and drain of the limited financial resources of the airlines.

Allowing foreign airlines into the Indian aviation sector will allow the benefits of alliances to yield as opportunities open up for domestic airlines to internationalize and offer better services and flying experience to their passengers.

On the retail front, the rapid movement on the 100% FDI retail has been hailed by international players and consumers, who are now waiting for high-end brands to begin their operations in India. In an effort to transform India’s rural economy, the government has introduced a mandatory domestic-sourcing policy, whereby retailers have to source 30% of their goods from local small- and medium-sized enterprises (SMEs). However, for multibrand retail, global retailers will have to source 30% from micro, small- and medium-sized enterprises (MSMEs).The move will encourage domestic value addition and manufacturing, thereby increasing employment, technology upgrading and income generation.

Image: People watch a passenger aircraft land at Mumbai airport REUTERS/Arko Datta