FDI flows into China has always made India envious. The government’s decision to allow 100 per cent FDI in the construction sector is therefore a good step since it will certainly augment FDI flows into the country since there is international interest in it. There are several companies waiting to come in. FDI flows will bring in new technology, competition and modern ways of organising construction. With Press Note 18 out of the way for those starting new joint ventures, foreign firms may be expected to take the plunge, whereas earlier they may have been more wary. Local firms stand to gain from this rather than be wiped out.The move will also bring the construction sector into the white economy and greater tax compliance. The size of the sector is so large that the benefits from the inclusion of the sector in the tax net can give a big boost to tax revenues. Stamp duties should be removed. A VAT-based service tax can fetch revenues in a more efficient and non-distortionary way. Doing away with stamp duties will also reduce the incentive for the large non-white component in the secondary market for housing. States wanting to attract foreign companies will get the incentive to amend the Urban Land Ceiling Act.The pragmatism of the West Bengal government, in contrast to the shouting brigade of arm-chair Left ideologues meant that leftists could hardly oppose the government’s decision at the Centre with any semblance of integrity. The next step of the Central government should be to open up the retail sector to FDI. This sector also needs to be pulled into the white economy. Further, there are great benefits to the consumers that come from new ways of organising retail and logistics. Today most of the emerging modern supermarkets in India are not accessible to poor. However, large retail companies like Walmart in the US have organised retailing in a manner that has brought huge benefits to the poor by keeping prices low. Instead of protecting the traders, the Left should start thinking about the interest of Indian consumers who are by far more numerous and much poorer than the retailing community.
