Aware that FDI in retail will bring in investment only in the long term, the government is planning to individually convince large corporates entrenched in India to pump in Rs. 25,000 crore more of immediate investment.
According to a Finance Ministry official, though India’s GDP grew just 5.3% in the second quarter of the current fiscal year, signalling that India could be headed for its worst economic crisis in nearly a decade, individual firms like Unilever have demonstrated double-digit growth in the last three years in the run-up to this grim backdrop, with maximum growth coming from the rural markets. The government believes that these companies could be persuaded to invest more.
The government has broken down the investment target in terms of sectors: Rs. 3,000 crore in food processing (ITC, Unilever), Rs.10,000 crore in power equipment (L&T, Mitsubishi and Korean firms), and Rs.7,000 crore in heavy engineering (Bombardier). Some Rs. 2,000 crore additional investments may happen in auto components through new hubs for global outsourcing for power trains, engines and sophisticated electronics. Another Rs. 3,000 crore will flow into textiles, the government hopes.
Justifying the effort, the official said even a GDP growth rate of 8.5% y-o-y would not generate adequate employment: “We need an investment rate of 38% of India’s $2 trillion GDP to generate employment for 50-60 million additional people every year.”