(a) Evaluate the policy of Government of India with regard to foreign investment in the country. Do you feel that there is a need…

India’s macroeconomic architecture balances external capital, trade competitiveness, and rural transformation. Foreign investment and export capacity serve as vital engines to finance growth and modernize domestic value chains, particularly in agriculture.

Foreign Investment Policy and the Need for Regulation

India’s foreign direct investment (FDI) regime has evolved from a pre-1991 restrictive, import-substituting framework governed by FERA to an open, post-1991 regime under FEMA. The current framework operates through two channels: the Automatic Route, covering the vast majority of sectors, and the Government Route for sensitive domains. Sectoral caps have been progressively eased, expanding defence to 74% under the automatic route (100% via government approval), insurance to 74%, and single-brand retail to 100%. In multi-brand retail, FDI remains capped at 51% with mandatory domestic sourcing conditions, while the Foreign Investment Promotion Board (FIPB) was abolished to enhance administrative efficiency.

Evaluating this policy reveals that while FDI inflows have provided stable, non-debt capital and integrated Indian industry into global supply chains, calibrated regulatory control remains indispensable. First, national security considerations require targeted oversight, as demonstrated by Press Note 3 (2020), which mandated prior government approval for investments from countries sharing land borders to curb opportunistic takeovers. Second, regulatory checks prevent aggressive transfer pricing and excessive profit repatriation, ensuring genuine domestic technology transfer and value addition. Third, FDI limits in multi-brand retail protect millions of livelihoods in the unorganized retail and small farming sectors from predatory pricing. The appropriate policy stance is not protectionist obstruction, but strategic regulation that safeguards economic sovereignty while maintaining an investor-friendly climate.

Export Promotion Measures (Last 10 Years) and Outcomes

Over the past decade, the Government has implemented structural and fiscal measures to scale exports: The Remission of Duties and Taxes on Exported Products (RoDTEP) replaced earlier non-WTO-compliant schemes; the Export Promotion Capital Goods (EPCG) framework was streamlined; and the Production-Linked Incentive (PLI) scheme was rolled out across 14 manufacturing sectors. Concurrently, India revitalized its trade policy through modern Free Trade Agreements (FTAs), notably the India-UAE CEPA and the India-Australia ECTA, alongside the ‘Districts as Export Hubs’ initiative.

These measures have yielded mixed results. On the positive side, total exports reached a record high exceeding $775 billion in FY23, driven by resilient services exports (information technology and business consulting) and rapid growth in electronics manufacturing and smartphone exports under PLI. However, structural deficits persist. Merchandise exports remain vulnerable to global demand shocks, with the export-to-GDP ratio remaining largely range-bound between 20% and 22%. Market diversification beyond traditional Western destinations remains slow, and the merchandise trade deficit continues to be wide due to heavy import dependencies on crude oil, gold, and critical electronic components.

The Second Green Revolution and NCF Recommendations

The call for a Second Green Revolution emerged because the initial Green Revolution of the 1960s resulted in severe ecological and spatial distortions: acute groundwater depletion, soil salinity and nutrient imbalance, crop monoculture vulnerability, and regional concentration in north-western India. Yields in these green revolution heartlands hit a plateau. The Second Green Revolution is conceived to be ecologically sustainable, nutrition-focused, and regionally balanced, specifically targeting rainfed agro-ecosystems and the eastern states (Bringing Green Revolution to Eastern India).

The National Commission on Farmers (NCF), chaired by Prof. M.S. Swaminathan, provided the blueprint for this transformation:

1. Pricing and Returns: Setting the Minimum Support Price (MSP) at a minimum of 50% over the comprehensive cost of production (C2 + 50%).
2. Credit and Risk Management: Reducing agricultural credit interest rates to 4%, establishing an Agriculture Risk Fund, and restructuring debt during consecutive natural calamities.
3. Resource Conservation: Prioritizing aquifer recharge, participatory watershed management, and soil health testing.
4. Value Addition and Markets: Expanding post-harvest infrastructure, setting up state-of-the-art grading and storage facilities, and fostering farmer-centric market access.

Despite significant progress in soil health cards and rural credit expansion, implementation gaps remain regarding statutory MSP guarantees and tenancy security.

Verdict

India's long-term economic resilience depends on the structural synergy of these three pillars: attracting foreign capital into high-technology food processing and industrial manufacturing, converting these investments into export competitiveness, and implementing the Swaminathan Commission’s ecological and pricing reforms to ensure agricultural sustainability. Regulatory controls on foreign capital must serve targeted strategic priorities, while export and farm policies must address domestic structural bottlenecks to deliver balanced growth.