Blog: Modi’s FDI initiatives to aid job creation

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Modi’s FDI initiatives to aid job creation

The Modi government has profoundly liberalized and in a way revolutionized FDI in key sectors in an effort to give impetus to job creation and employment with the approval of 100% of FDI in certain sectors.
Modi’s FDI initiatives to aid job creation

India has been rated as the number 1 destination for FDI investment and recorded the highest FDI inflow at US $55.46 billion in the year 2015-16. With a number of reforms in sectors such as Defence, Construction Development, Insurance, Pension Sector, Broadcasting Sector, Tea, Coffee, Rubber, Cardamom, Palm Oil Tree and Olive Oil Tree Plantations, Single Brand Retail Trading, Manufacturing Sector, Limited Liability Partnerships, Civil Aviation, Credit Information Companies, Satellites- establishment/operation and Asset Reconstruction Companies over the last couple of years, India has achieved the highest FDI inflow in a financial year. 

The amendments in the FDI policy are set to accelerate business investments by foreign investors & establish 100 per cent ownership in companies involved in defense, civil aviation and food products, although with government approval. But this has a major impact on the job industry. Let us take a look at how foreign direct investment can positively affect the Indian job sector.

  1. Employment stability: Multinational firms, enhanced infrastructures and knowledge intensive organizations are less likely to liquidate or collapse. This in turn will enable more stability in jobs for the workforce.

  2. Job creation: With the labor force in India all set to rise to 556.8 million by 2020, FDI will have a positive direct and indirect impact on employment in a developing economy like India. With the advantage of demographic dividend, India’s surplus labor will see more employment opportunities with foreign direct investments. This will be in two ways – foreign investors and new market entrants will employ Indian workforce for running their businesses and at the same time, jobs will be created as a consequence of the investment and increased local spending.

  3. Increased wages & productivity: With increase in FDI, the rate of premium wages will also accelerate. According to a study, “There is indeed evidence suggesting that foreign acquisitions lead to a sizeable and statistically significant productivity boost.” With foreign owned companies paying a higher price for labor than the domestic firms, and bringing more knowledge, there can be an upsurge in wages and simultaneously productivity of the workforce.

  4. Improvement in the quality of workforce: Increased FDI will affect the overall quality of the workforce in terms of skills and knowledge which is set to have a direct impact on productivity, economic welfare, revenue and economic growth. Along with thus, provision of trainings and upgrading of human capital can provide significant growth.

Topics: Jobs, Recruitment

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