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The latest FDI rule changes may not be enough to draw a rush of investments

On the face of it, the Centre’s announcement on Foreign Direct Investment (FDI) norms on Wednesday appears to be one more push to make India a more attractive destination to overseas investors, especially those keen on entering the market for the long haul. From extending the available 100% FDI under the automatic route in the coal mining sector (till now permitted only for captive consumption) to include those companies seeking to commercially sell the commodity, to distinctly including contract manufacturing under the automatic 100% route and easing local sourcing norms for overseas investors in the Single Brand Retail Trading (SBRT) business, the changes in investment guidelines approved by the Cabinet have been touted as “FDI policy reform”. The government, clearly concerned by the economic slowdown and persistently weak investment activity, has sought to provide a policy fillip to attract more foreign capital into sectors that it sees as having a multiplier ef...

With or without: On U.K. Parliament suspension

Boris Johnson seems bent on delivering a no-deal Brexit Prime Minister Boris Johnson’s audacious move on Wednesday to prorogue Parliament for five weeks is a cynical attempt to silence elected representatives on the key issue of Britain’s future ties with the European Union (EU). The decision is all the more suspect because the fraught political climate that has prevailed since June 2016 was the consequence of the country having to renegotiate the nature of its ties with its closest neighbours. Those complex questions could only have been addressed on the floor of the house. Mr. Johnson has sought to play down the controversial decision as no more than an intent to commence a fresh legislative session with the Queen’s speech charting the government’s domestic priorities. But the outrage the country has witnessed suggests that despite its legal correctness, the move may have set a terrible precedent and possibly eroded the Conservatives base. The long suspension...

Big bank theory: On Public Sector Bank mergers

For the mergers to work, realising staff cost synergies is key For its sheer magnitude, the scale and the ability to disrupt the status quo, the mega bank mergers announced by Finance Minister Nirmala Sitharaman on Friday must go down as the most significant the banking industry has seen in the five decades since nationalisation. The bottomline is clear: to create banks of global level that can leverage economies of scale and balance sheet size to serve the needs of a $5-trillion economy by 2025. The jury is, of course, out on whether this strategy will succeed. Mergers are driven by synergies — in products, costs, business, geographies or technology and the most important, cost synergies. While there may be some geographical synergies between the banks being merged, unless they realise cost synergies through branch and staff rationalisation, the mergers may not mean much to them or to the economy. This is where the government’s strategy will be tested. It is no secret tha...

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