In Foreign Direct Investment Policy, increasing Indian equity ownership in Multinational Companies would offer diversified benefits and make them more prosperous. Discuss (200 Words)
Refer - The Hindu
Enrich the answer from other sources, if the question demands.
IAS Parliament 5 years
KEY POINTS
· Foreign Direct Investment (FDI 1.0) has been welcome in India irrespective of whether or not its equity structure includes Indian public shareholding.
· However, the world has undergone a structural change with the emergence of Internet Multinational Companies (MNCs) such as Microsoft, Google, Facebook and Twitter that are based on ‘winner-takes-all’ platform business models.
· Rather than accepting the ‘winner MNC takes it all’ as fait accompli, FDI 2.0 should harmonise interests of all stakeholders including Indian consumers, the government and investors.
· FDI 2.0 could deploy ‘List or Trade in India’ as a strategic policy tool to enable Indian citizens become shareholders in MNCs such as Google, Facebook, Samsung, Huawei and others, thus capturing the ‘upside’ they create for their platforms and companies. This is equitable to all, since Indian consumers contribute to the market value of MNCs.
India could implement the following set of proposals:
List in India
· Majority (more than 51%) foreign-owned Indian-listed MNCs could be eligible to domestic company tax rate whereas unlisted MNC subsidiaries could be subjected to a higher tax rate. Many countries such as Bangladesh, Vietnam and Thailand have used tax incentives to attract listing by MNCs.
· This by itself, will not achieve the objective of increasing Indian participation in the fair value of Internet MNCs. This is because of complex issues in revenue booking that result in low profits in Indian subsidiaries.
· Hence, there is a need for additional initiative by way of proposal 2 to enable Indian investor participation in the ownership of parent MNCs’ shares.
· The Mexican Stock Exchange allows trading of international shares listed in other stock exchanges. India could replicate such models.
Wealth distribution through mutual funds would create a virtuous cycle of innovative ideas, entrepreneurship, employment, consumption, higher taxes, social and physical infrastructure for the benefit of Indian society. MNCs would earn the goodwill of Indian consumers while expanding their investor base. In other words, this is a win-win for all stakeholders.
Anu 5 years
Kindly review. Thank you.
IAS Parliament 5 years
hema 5 years
Kindly review thank you
IAS Parliament 5 years
Try to include about trading of international shares, liberalised remittance scheme. Keep Writing.
Shivangi 5 years
Please review.
IAS Parliament 5 years
Good answer. Keep Writing.
Madeshwaran 5 years
Kindly review
IAS Parliament 5 years
Try to include about trading of international shares, liberalised remittance scheme. Keep Writing.
Loading Comments