Out of the four main factors of production — land , labour, capital, and organisation — capital becomes a critical factor, especially in the case of developing economies where there is shortage of capital and various sectors vie with each other for more and more investments. It is but natural that those who invest capital look for safety, security, and good returns.
In a globalised environment, the movement of capital investment can sometimes be volatile and sometimes can corner ownership to the detriment of domestic ventures. In order to protect domestic business, regulation becomes necessary and sometimes it can be counter-productive.
In the construction business this 100 per cent investment was extended in the year 2005. NRIs and PIOs were only permitted to invest in housing and real estate. Foreign investors other than NRIs were allowed to invest only in development of integrated townships and settlements either through wholly owned subsidiaries or through joint venture companies in India along with a local partner
Advantages of FDI
Major benefits are:
* Application of international standards to construction.
* Large inflow of funds at comparatively low cost
* Support of experienced workforce in good numbers
The perceived fears are:
* Foreign control
* Takeover of domestic companies, especially small and medium construction companies
* Withdrawal of investment at unexpected times
For any developing economy, there is need for a cautious approach in allowing substantial foreign investment. Some sort of protection to domestic entrepreneurship, especially the small and medium industries, needs to be enshrined in the rules and regulations.
Employment opportunity to local talent is another area which needs protection. Semi-skilled and even unskilled domestic labour need to be upgraded to avoid overdependence on foreign help.
For sectors such as infrastructure and housing, the gap between funds availability and actual requirements needs to be reduced for reasonably fast and sustained growth. A balanced approach can be the best solution.
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