After the wreckage of the Indian Rupee and commotion in the stock market; potential foreign investors are getting increasingly disenchanted with the Indian market. Ashutosh Misra investigates.
The Indian government is pulling out all stops to attract foreign investment but the efforts seem to be in vain. For various reasons, foreign companies are exiting India or putting their plans on hold. Arcelor Mittal and Posco are merely the face of the disenchanted foreign investors. Ikea, for whom all norms were eased, is in no hurry to open stores. Wal-Mart is dithering over converting its $100 million convertible debenture investment into 49 per cent equity in Bharti Group Company by September 30, and effectively delaying its retail foray. The two companies are already partners in wholesale business. India hardly found mention when Wal-Mart brass was making a presentation after the announcement of second quarter results. Wal-Mart has also shifted Mitch Slape, chief operating officer of Bharti Retail, to the US, a sign of downgrading of ties with the “natural partner”. After the battering of rupee and mayhem in stock markets, India’s appeal abroad has decreased even further.
Arcelor Mittal and Posco are merely the face of the disenchanted foreign investors. Ikea, for whom all norms were eased, is in no hurry to open stores. Wal-Mart is dithering over converting its $100 million convertible debenture investment
As Rahul Gandhi said poverty is a state of mind. The Indian policymakers and Congress politicians are showing poverty of ideas when it comes to kick starting the economy. The poor guys from Congress suffer from intense self-doubts and have given up hopes of garnering a majority on their own even before elections. They are afraid of losing power and sucking up to opportunists like Karunanidhi, Mulayam Singh, Mayawati and Nitish Kumar. To add to the mess, rabble rousers like Mamata Banerjee are scaring away the investors – local and foreign. The Manmohan Singh-led government has the brainpower to turn the country around but instead has surrendered its right to govern to Sonia Gandhi-led National Advisory Council. Gandhi and cohorts have an outdated socialist viewpoint and instead of unleashing animal spirits of Indian trying to domesticate them by addicting them to crumbs such as rural job guarantee scheme and Food Security Bill.
Mahatma Gandhi had advocated developing villages as self-sufficient economic units. This may not be feasible today but the country as a whole can be turned into a self-sufficient entity. The dollars may be hard to come then but they are not exactly flowing in even today. Hopefully, the Indian policy makers are no longer deluded by the India-China growth race hype. They need to understand that a democratic country where accountability and inclusiveness are as important as growth needs a different growth model than an oligarchy of prince lings which can fudge figures and muffle dissent. In case of China, the Li Keqiang index compiled by Professor Patrick Chovanec of Tsinghua University puts the growth at below 2 percent. So we will only know the truth about China when it implodes.
Elections are due next year and this is resulting in politics getting precedence over economics. India Inc is getting ignored because the Food Security Bill and such populist measures present a better chance of getting votes
The Indian government instead of trying to lure multinationals must find ways to encourage Indian companies to start reinvesting in India rather than looking for opportunities abroad. If India is a market that attracts foreign companies, then why should not the Indian companies get the right to first make the most of the demand? Elections are due next year and this is resulting in politics getting precedence over economics. India Inc is getting ignored because the Food Security Bill and such populist measures present a better chance of getting votes. But the politicians must remember that economic and physical well-being is high on today’s voters’ wish list. Like George Bush Sr they can ignore the writing on the wall, “It’s the economy, stupid!” at their own peril.