lannin in ndia 5.43
used to consider the PSUs as the ‘temples of (i) It was not either ‘direct’ (as we see FDI
modern India’. during the reform process) or ‘indirect’
(as the PIS ), but via technology transfer.
PhAse-ii (1970—73) (ii) Foreign entities could enter only those
With the enactment of the Industrial Policy of 1970 industrial areas which were open for the
we see GoI deciding infavour of including ‘private Indian private sector (under Schedule B of
capital’ in the process of planned development— the Industrial Policy Resolution, 1956).
but not in a big and open way. The idea of ‘Joint The ‘monopoly’ industries under GoI
Sector’ comes under which a combination of (some of the most attractive industries
partners—Centre, state and private sector—could for the private sector) remained closed for
enter the industrial sector. This was done basically, entry.
to make private sector come up in areas which It also means, that India failed to articulate
were open for them, but due to certain technical an investment model which could tap the better
and financial reasons they were not able to take elements of the foreign capital—state-of-the-
part. In due course of time the government did art technologies, better work culture and most
quit such ventures and such industrial settlements importantly, scarce investible capital. Experts
came under complete private control. believe it as a missed opportunity for India. By
1965–66, the South East Asian economies like
This is for the first time we see the government
Malaysia, Indonesia, Thailand and South Korea
inclining on private funding for planned
had opened up their economies for both forms of
development, but we do not see any private entry
foreign investments—direct as well as indirect—
in the GoI’s monopoly areas of industrial activities
and the governments there ‘decontrolled’ the
(which takes place only after the reform process
industrial sectors, which were earlier fully under
begins in 1991).
government controls (it should be noted here that
these economies had started exactly the same way
as India had started after Independence). This gave
With the enactment of the FERA in 1974 we see those economies a chance to tap not only scarce
the government, for the first time, proposing to investible fund into their economies, but the state-
take the help of ‘foreign capital’ in the process of of-the-art technologies from the world and world
planned development—but not via cash foreign class work culture and entrepreneurship, too.
investment—only through the ‘technology Soon these economies came to be known as the
transfer’ route that too up to only 26 per cent of Asian Tigers.
the total project value proposed by the private The period after 1985 saw dynamism in the
sector. Basically, under FERA government area of resource mobilisation— two consecutive
tightened the flow of foreign currency inflow Planning Commissions suggested for opening
into the Indian private sector, which started up of the economy and inclusion of the Indian
hampering the technological upgradation process and foreign private capital in industrial areas
and initiation of the state-of-the-art technologies which were hitherto reserved for the government.
from the world—the technology transfer route It suggested that GoI to withdraw from areas
was put in place to fill this gap. It means that where the private sector was capable and fit to
even if GoI tried to include foreign investment function (for example, infrastructure sector) and
in the developmental process its entry remained concentrate on areas where private sector would
restricted in two ways: not be interested to operate (for example, the