Accusing the United Progressive Alliance government of "heaping hardships on people," Tamil Nadu Chief Minister J Jayalalithaa flayed its "knee-jerk" reaction of increasing Foreign Direct Investment cap in different sectors and warned that its "insensitivity" towards people will take its toll soon.
"The FDI relaxation announced by the Government of India is neither an effective nor an appropriate measure to tackle the macro-economic imbalances faced by the country. Much more has to be done by way of policy initiatives to promote exports and to set right the current account imbalances," she said.
She criticised the UPA government for relaxing FDI limit in sectors including telecom and charged the Centre with "acting at the behest of foreign interests and some external agencies."
The Cabinet Committee on Economic Affairs' recent approval of raising FDI limit was a "weak bid to show some pretence of a policy response to an adverse economic situation," she said in a statement.
"These measures raise a number of serious concerns. Far from protecting the interests of workers and the common people of the country, the UPA Government appears to be acting at the behest of foreign interests and some external Rating Agencies which are frequently threatening to lower the sovereign rating to ‘Junk Status’ and thereby cowing down the weak UPA Government at the Centre, making it bend to its whims and fancies," she charged.
The decision also raised serious security and related concerns, which she alleged "have been totally ignored" and said the adverse impact on domestic industry, including on Central Public Sector Enterprises and employment has not been factored in.
On the increase in FDI cap in telecom sector from 74 per cent to 100 per cent, she said the move had implicit security concerns since foreign firms will be able to control the "entire telecom network."
She said data security and privacy issues will arise and will be difficult to regulate. Without naming any particular company, she said in a recent case a private service private service provider had put individual privacy ahead of national security.
"It is reported that even the Home Ministry at the Centre is against this move (FDI cap). Perhaps this move will only benefit foreign companies which have reportedly incurred losses on account of the orders of the Supreme Court in the issue of 2G licenses.
"Even advanced countries restrict foreign investment in the telecom sector precisely for security reasons, whereas the Government of India seems to be oblivious of these concerns," Jayalalithaa said.
The chief minister opposed raising FDI cap in insurance sector, saying the country had "strong" public sector insurance companies which served with public interest in mind.
Two of her state government schemes including the Chief Minister's Comprehensive Insurance Scheme were being operated successfully through public sector insurance companies.
Holding that the UPA does not have the numbers in Parliament to pass the pending Insurance Law (Amendment) Bill, 2008, she said perhaps it was confident of getting the support of erstwhile allies like DMK who, she said, had voted in favour of government on FDI in retail in Parliament despite its opposition.
"In fact the DMK’s opposition to these moves are an eyewash since (DMK chief) M Karunanidhi in his statement has let the cat out of the bag by stating that the Government of India should ponder over whether such stern measures should be taken at this juncture when the general elections are slated to be held next year," she said about his reaction to last week's FDI decisions.
Jayalalithaa also opposed the relaxation of FDI cap in the plantation sector, saying it will affect small tea growers.
As for the defence sector, she said while the Cabinet Committee on Security may consider higher investment levels for 'state-of-the-art technology,' there was, however, no clarity on what this state-of-the-art technology was.
"There are also grave security and self sufficiency concerns in allowing FDI in this very crucial sector. We must not allow the national interest to be compromised in any way," she said.
On Centre increasing the cap in FDI in single brand retail up to 100 per cent, Jayalalithaa said this must be made subject to the clearance of state governments so that small retail traders are protected.
"Announcements of this nature are only a knee-jerk reaction to the problem of the falling rupee. A depreciating rupee is not just a blow to the nation's prestige and sense of well-being, it also contributes to inflation, making life difficult for the common people who are already regularly buffeted by the increases in the prices of diesel, petrol and domestic gas," she said.
Stock Market indices and the views of the external credit rating agencies and fickle foreign investors on how liberal our economy is, were "not barometers for measuring the wellbeing of our people," she added.
Short sighted policies of increasing FDI caps will not help the rupee to strengthen, she said while calling for concerted policy action to promote exports, curb imports of non-essential items, and eliminate speculative trading in Forex Market to make rupee remain strong.
Further, investors were "shying away from India because of the poor governance record of the UPA government, its notoriety for corruption and scams" and its inability to act effectively to improve the infrastructure and investor environment in the country, she said.
"The UPA government is responsible for heaping hardships on the common people. The utter insensitivity of the Government of India towards the condition of the poor and needy, the middle class and virtually every section of society, by its acts of commission and omission, will take their toll in the not too distant future. The day of reckoning is near," she said.
