Article: FDI will add momentum to the economy


FDI will add momentum to the economy

Dr. Arvind Agarwal, President, Corporate Development & Group HR, RPG Enterprises
FDI will add momentum to the economy

The immediate need for skilled manpowermust be addressed by companies themselvesto build a talent pipeline that canbe utilized in 24-36 months


The reforms in FDI are welcome and have been well received by the industry. It will bring in much needed cash flow and help accelerate the economy which has slowed down off late. Growing economy translates into increased number of opportunities. It will also mean tougher times ahead in terms of quality of the products and services that we deliver. For example in the Retail sector, if Carrefour, Walmart, Tesco etc., come and set shop, Indian retailers will have to raise their standards of operations, customer service etc.

As businesses expand, people will be increasingly critical for business and to ensure that we have the right people, we need to invest in developing talent. HR will play an important role, in terms of acquiring, developing and retaining quality talent, as we already have shortage of talent at every level. Wages would also go up due to this because the supply-demand gap. Global competition has been the order of the day for over a decade. Businesses today have become global in terms of the market, products and services. In India, wages are anyways growing at a very fast pace as compared to many countries of the world. Every year we see a wage increase of 10-12 percent which is higher than any other country. We already have that as a major challenge to deal with. Increase in wages are not the concern, the real concern is that productivity is not increasing at the same rate. Wage increase needs to be justified by increase in productivity else it will not be sustainable. We as a nation will become non-competitive. India is actually not a low-cost economy. If we take the productivity factor into account, we are already a high-cost economy. If we do not work towards acquiring this balance Indian products will become non-competitive in the global market, similar to what has happened in Europe. An optimum balance between wages and productivity can be attained with a two pronged approach. Not only employees need to be more effective, but also businesses need to have the right kind of technology, better processes and better skills and the right kind of attitude.

Good news is that we have already started working towards achieving global standards. Companies are taking charge of talent development, hiring people and developing them so they can commensurate whatever is required. They are also investing in technology so that the products offered in the market are competitive. However we still have a long way to go.
What FDI does is that it gives momentum to the economy resulting in faster growth. Globalization process started in 1991, and the recent reforms will hasten with this process. Although India is not in the recession phase, but growth has slowed down. Still 5.5% expected growth is one of the highest in the world. With these reforms, I see acceleration in economic growth for the country.

However some of the policies can be showstoppers. In the last few years we have seen a series of scams, and the government’s inability to put these reforms together for policy changes. Cases such as the Vodafone taxation have created a regressive concern. As for apprehensions around losing jobs, I believe that change always makes people apprehensive. Looking back, when industries were getting technically advanced, there was a similar perception about people losing jobs. However what happened was to the contrary. Advancements bring operational efficiency and competition, which is in turn beneficial for all stakeholders. To sum it up, reforms in FDI will translate in accelerated growth of the economy, increased opportunities for people and more choices for consumers.

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Topics: C-Suite, Strategic HR

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