Blow out the candles, here comes the sun

In 1845, the classical liberal theorist, Federic Bastiat, wrote a satirical piece on protectionist petitioners, entitled, “A petition by candle makers”, in which he depicted how the candle makers of a French town petition public authorities to block out the sun. Though the comments made by stakeholders on the consultation paper on increasing FI limits in broadcasting services cannot be termed a petition by candle makers, it left me disappointed. None of the stakeholders gave an opinion in favor of 100% Foreign Direct Investment (FDI) cutting across all sectors. A libertarian by education, here is my argument for 100% FDI cutting across all sectors.

There exist two schools of thoughts on the question of differentiation of FDI limits in carriage and content services. One advocates that they are providing different services, there are different considerations and hence different permissible FDI limits. In the first instance this appears to be a reasonable approach. However in this day and age of convergence of technologies and integration of business, carriage providers also play the role of content producers, visa-versa. Sample, TATA Sky, where it provides a DTH service on which it provides channels it produces. I personally endorse the second view, as it allows business to vertically integrate, giving freedom of trade and resulting in economy on a macro level. Hence the FDI limit should be uniform across all broadcasting sectors.

My arguments for raising the limit to 100% in all sectors is (a) the need for competition in these services lest national oligopolies are created in this sector; (b) flow of latest technology and service practices; © availability of quality international content; (d) capital inflows; and (e) most importantly legal policy aiding the natural growth of convergence of technologies, services and businesses. In this day and age of the internet, foreign content produced and carried by 100% foreign entities is readily available. With the advent of broadband speeds and streaming internet television, there exists no argument for us to limit our foreign inflows.

100% FI is generally rejected on grounds of National Security. National security is a weak argument to place restrictions and is an echo of protectionist policies. We should not presume our businesses to be weak and inefficient. Moreover, there exist a plethora of laws to regulate foreign holdings. These statutes provide enough power to protect national security. A sampler is that the government may take out a notification and can block the access of any television channel. Hence a national security argument is a nonstarter.

I believe that there is an absence of quality content and carriage services, though FDI is not a guarantee for it, it may promote it. Hence I recommend that FDI limits in all sectors be increased to 100% with FIPB Approval and 49% under automatic route. Blow out the candles, here comes the sun.

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On a more immediate note, the recommendations made by stakeholders that FI limits be brought on parity for carriage services, be accepted. Different technologies for carriage services do not require different FI limits. Different FDI limits certainly tilt the scales in favors of a particular technology. This will be in keeping with TRAI’s lauded objective of maintaining a level playing field.

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