Skip to main content

Govt, Congress united by 'imbecility': Order restricting investments from 'neighbours'

By Mohan Guruswamy*
A couple of days ago Rahul Gandhi demanded that the government "protect" Indian corporations from takeover by cash flush Chinese entities. He was spurred after it was announced that the Peoples Bank of China (PBOC) has increased its shareholding in HDFC from 0.8% to 1.01%. The Chinese Central Bank had bought these 1,74,92,909 crore HDFC shares worth about Rs 2900 crore between January and March 2020. This level of shareholding won’t even give PBOC a stool next to the watchman's at HDFC’s front door.
Yet the government responded to this somewhat immature and kneejerk demand with surprising alacrity. It responded the very next day with a hasty order that entities from countries that share land borders with India -- Pakistan, Afghanistan, China, Nepal, Bhutan, Bangladesh and Myanmar -- have to take permission from the government prior to making investment. In a day when money doesn’t move in chests atop camels, what have land borders got to do with it? This order is just not artful enough to conceal that it is aimed at China.
As before, investors from countries not covered by the new policy only have to inform the Reserve Bank of India (RBI) after a transaction rather than asking for prior permission from the relevant government department. That means investors from Mauritius ($8.1 billion in 2019) and Singapore ($16.2 billion in 2019), from where about 50% of our FDI ($49 billion in 2019) comes and USA, UK, EU and Russia etc. can invest as usual. The first two countries are the more favored conduits for Indian money stashed overseas.
According to the Department for the Promotion of Industry and Internal Trade (DPIIT) India received FDI from China worth $2.34 billion (Rs 14.846 crore) between April 2000 and December 2019. This merely rose from $1.4 billion by about $900 million in the Modi era.
During the same period, India has attracted Rs 48 lakh from Bangladesh, Rs 18.18 crore from Nepal, Rs 35.78 crore from Myanmar, and Rs 16.42 crore from Afghanistan. The Chinese portfolio investments in startup companies such as Snapdeal, Ola, Swiggy, Paytm etc. now amount a little over $6 billion. In all this makes overall Chinese investment in India an unthreatening 1.3% of the cumulative FDI ($621 billion) since 2000.
The note specifically aims at curbing “opportunistic takeovers or acquisitions” ignoring the reality that all such buys are just that. And let us not forget that the Jaguar-Land Rover and SsangYong sales to Tata Motors and Mahindra’s were distressed sales. Good times and bad times are equally opportune for corporate buys. Can the government tell us why American or British or Korean FDI are better than Chinese investments in these times?
The governments order is a blanket order that does not distinguish between greenfield or brownfield investments or listed and unlisted companies. For all practical purposes, it just is a case by case handbrake on Chinese investments. Our policy hitherto allowed FDI in particularly distressed sectors like construction and real estate. These sectors were stressed long before the advent of Covid-19.
There are more distressed sectors now, so shouldn’t we be getting the cash flush Chinese to invest in them? It’s not that Indian companies are not flush with cash. We have as many as 52 companies with cash reserves in excess of Rs 25000 each. The problem is that they are not investing in India and have showed a marked preference to invest abroad. In March 2020 alone Indian FDI outflows touched $2.68 billion. It was $2.34 billion in March 2019.
China-made TV and mobile phone kits keep flooding India as do firecrackers, kites, manja, pichkaris, milk-drinking plastic Ganeshas
For over a decade Indian Prime Ministers have been soliciting Chinese investment, partly to mitigate the huge trade deficits we have been posting with it. Last year it was $57.4 billion. Heavens are not going to fall if Chinese companies invest more like when SAIC (MG cars) took over the defunct GM plants. Or if Haier competes more aggressively with the dominant positions of Samsung and LG in white goods. India benefits by this. 
One can understand if we have a policy against Huawei in 5G, but we have welcomed it. Chinese investors have made big bets in India's startups like Flipkart, PayTM, Zomato etc. and driven them up to huge valuations.
Instead of FDI, we should be taking a good look at the growing trade deficit with China and narrowing it down. Yet we have no policy on it. TV and mobile phone kits keep flooding India as do firecrackers, kites and manja, pichkaris and milk drinking plastic Ganeshas. Then we have big retailers like IKEA, which mostly sell Chinese goods.
Finally, we must realize that money doesn’t have any color. The litmus test for FDI should only be whether it adds value to our economy and adds to our employment. Any company, irrespective of the predominant nationality of its shareholding, is an Indian corporate citizen and is bound by Indian laws and policies.
Thus, if the government demands that, say, Nestles and Brooke Bond must export 20% of their instant coffee or face fiscal disincentives, or buy coffee or cocoa beans only from local producers, they have to comply. And contemplate this. Even in a conflict with China, SAIC and Haier will keep producing in India, like Bayer kept producing poison gas for the Allies and Germans during the First World War.
---
*Well-known policy analyst. Source: Author’s Facebook timeline

Comments

TRENDING

Ganga world's second most polluted river, Modi's Varanasi tops microplastics pollution

By Rajiv Shah  Will the new report by well-known elite NGO Toxics Link create a ripple in the powerful corridors of Delhi? Titled “Quantitative analysis of microplastics along River Ganga”, forwarded to Counterview, doesn’t just say that Ganga is the second most polluted river in the world, next only to Yangtze (China). It goes ahead to do a comparison of microplastics pollution in three cities shows Varanasi – the Lok Sabha constituency of Prime Minister Narendra Modi – is more polluted compared to Kanpur and Haridwar.

How real is Mamata challenge to Modi? Preparing for 2024 'khela hobey' moment

By Prof Ujjwal K Chowdhury*  Third time elected West Bengal Chief Minister, Mamata Banerjee is on a whirlwind tour of Delhi, meeting everyone who matters within and beyond the government, the Prime Minister, the President, some Cabinet ministers, Sonia and Rahul Gandhi, several other opposition leaders, et al.

Did Modi promote Dholavira, a UNESCO site now, as Gujarat CM? Facts don't tally

By Rajiv Shah  As would generally happen, Prime Minister Narendra Modi’s tweet – that not only was he “absolutely delighted” with the news of UNESCO tag to Dholavira, but he “ first visited ” the site during his “student days and was mesmerised by the place” – is being doubted by his detractors. None of the two tweets, strangely, even recalls once that it’s a Harappan site in Gujarat.

UP arrest of 'terrorists': Diverting attention from Covid goof-up, Ram temple land scam?

By Advocate Mohammad Shoaib, Sandeep Pandey* That corruption is rampant in police department is a common experience. However, there is another form of corruption which devastates lives of individuals and their families. It has now emerged as a common phenomenon that police more often than not register false cases because of which individuals have to spend number of years in jail.

If not Modi, then who? Why? I (an ordinary citizen) am there! Main hoon naa!

By Mansee Bal Bhargava*  The number of women ministers is doubled in early July from the first term after cabinet reshuffle by the present government led by Narendra Modi. While there were 06 women ministers in the previous term, this term there are 11. The previous two governments led by Dr Manmohan Singh had 10 women ministers in each tenure. Are these number of women ministers something to rejoice in the near 75 years of independence? Yes maybe, if we think that things are slowly improving in the patriarchal system. This change is less likely to achieve gender balance in the parliament otherwise we require more than 11 as per the 33% reservation . This change is also less likely because the men politicians’ inability to handle the country’s mess is becoming more and more evident and especially during the corona crisis. Seems, the addition of more women ministers may be a result of the recent assembly elections where women played a decisive role in the election results. For example

Swami Vivekananda's views on caste and sexuality were 'painfully' regressive

By Bhaskar Sur* Swami Vivekananda now belongs more to the modern Hindu mythology than reality. It makes a daunting job to discover the real human being who knew unemployment, humiliation of losing a teaching job for 'incompetence', longed in vain for the bliss of a happy conjugal life only to suffer the consequent frustration.

Buddhist shrines massively destroyed by Brahmanical rulers in "pre-Islamic" era: Historian DN Jha's survey

Nalanda mahavihara By Our Representative Prominent historian DN Jha, an expert in India's ancient and medieval past, in his new book , "Against the Grain: Notes on Identity, Intolerance and History", in a sharp critique of "Hindutva ideologues", who look at the ancient period of Indian history as "a golden age marked by social harmony, devoid of any religious violence", has said, "Demolition and desecration of rival religious establishments, and the appropriation of their idols, was not uncommon in India before the advent of Islam".

Effluent discharge into deep sea? Modi told to 'reconsider' Rs 2275 crore Gujarat project

Counterview Desk  In a letter to Prime Minister Narendra Modi, well-known Gujarat-based environmentalist, Mahesh Pandya of the Paryavaran Mitra, has protested against the manner in with the Gujarat government is continuing with its deep sea effluent disposal project despite environmental concerns.

Khorigaon demolition: People being 'brutally' evicted, cops 'restricting' food, water

By Ishita Chatterjee, Neelesh Kumar, Manju Menon, Vimal Bhai* On July 23, the Faridabad Municipal Corporation told the Supreme Court that they have cleared 74 acres out of 150 acres. Despite the affidavit of the Municipal Corporation, the court, on the complaint of various litigants, that the arrangements for living, food etc. have not been made for the people. 

Gujarat govt gender insensitive? Cyclone package for fisherfolk 'ignores' poor women

By Our Representative A memorandum submitted to the Gujarat government by various fisherfolk associations of the Saurashtra region of Gujarat under the leadership of Ahmedabad NGO Centre for Social Justice's senior activist Arvind Khuman, who is based in Amreli, has suggested that the relief package offered to the fishermen affected by the Tauktae cyclone is not only inadequate, it is also gender insensitive.