Updated: Sep 12, 2020
There is a huge uproar against using the products of Chinese/foreign companies and there is no dearth for social media messages and forwards proclaiming and declaring the evil side of consuming the foreign products. Someone had even found an application to delete the "Chinese app" from your mobile phone. Does that really make any sense? Are we trying to treat a dead man instead of arranging for his funeral?
In 1991, the Narasimha Rao lead Congress Government had opened up the economic barriers of Indian economy with a goal of making the economy more market- and service-oriented, and expanding the role of private and foreign investment. Till then the Indian Economy was protected from outside competitors and investors to a larger extend and newly introduced polices had opened up an ocean of opportunities to the foreign companies to invest in India. The low annual growth rate of the economy of India before 1980, was stagnated around 3.5% from the 1950s to 1980s, while per capita income averaged to 1.3%. Post liberalisation, the growth of Indian Economy, which was on a snail speed till then, had pulled up the gears and surpassed the growth of China in the year 2015. To a larger extend, the growth rate of Indian economy can be directly attributed to foreign investment. The investment from abroad had fuelled the economic activity of the country and thereby increased the gross domestic product(GDP) of the Country. The more economic activities had generated more employment opportunities and thereby improved the growth potential of the nation, further. More sophisticated technologies had got introduced Into the Indian market and lured the consumerism in the minds of common people. The growth of India had arrested the “brain drain” to a larger extend, as most of the foreign companies had opened up their factories and offices in India and thereby created more employment avenues to the real talents natured in India.
Every coin have other side too.
The demographic dividend and the huge population of India had made it a most favoured investment destination of many developed countries, whose growth rate already got stagnated due to low population growth and matured market conditions. The deteriorated value of Indian Rupees against major foreign currencies had prompted many foreign conglomerates to invest heavily in India. On an average 600-750 Indian companies are being acquired or taken over, annually, by foreign companies or companies controlled by foreign nationals. The CII-PwC study also noted that India has seen M&A activity in excess of USD billion 123.7, 182.6 and 348.3 over the last three, five and ten years, respectively, representing an annualised growth of 13.2, 13.7 and 4 per cent, for the respective periods. The relaxed economic and foreign direct investment policies and norms of the Government of India, without any barriers had resulted in hostile takeover of many Indian companies such as, to name few, Flipkart, Ola, Byjus, Ranbaxy, Suzlon, Maruti etc. The major reason for the high level of foreign investment into India is the deteriorated valuation of Indian Rupees. The same is not only resulting in hostile acquisition of Indian companies by foreign nationals or foreign entities, but preventing the Indian Companies from reaching the foreign markets, also. The opening up of economic barriers had opened up avenues to Indian investors, but any attempt to invest from India will be failed miserably due to the heavy exchange rate disparity.
Many of the companies, which we believe as Indian entities, are not truly Indian due to the foreign invasions in the form of foreign investment. Many of the products, which we believe as Indian Products, are not truly Indian. If we had faced “brain drain” as a challenge , which prevents our nation’s growth in pre liberalisation era, the new investment policies are not only acquiring the brilliant brains but "buying out" their intellectual capacity also, forever. At the culmination stage of the proudly announced "Foreign Investment" , the long cherished entrepreneurial dreams of an average Indian is getting shattered in the lime light of foreign investments. The Corporate India had already witnessed many "Bansals" who had to walk out of the board rooms, by hanging their heads, which were once filled with ideas and intellect. Having said this, I believe that, there is nothing wrong in getting foreign investment, as capital is the most important ingredient of a commercial activity. But, if the said investment is at the cost of your intellectual wisdom and challenging your potential to grow fast and free, then that is not an ideal way of doing a business. It is nothing less than intellectual slavery.
Every problem have a solution too.
The foreign investment had undoubtedly contributed towards the growth potential of India in a very short span of time. But the price we are paying for that support is very huge and beyond our imagination. If the British had taken over the control of India using the force and might of their armed forces, the new age corporates are using their cheap capital to conquer the might, brain and heart of corporate India. The barriers of the economy had already opened up and there is no going back. It is not feasible , possible or advisable. The right way to fight this financial invasion is to provide adequate fund flow to Indian companies from Indian sources and encourage Indian consumers to buy the products of indigenous companies. The Government should step in to the scene by providing more tax holidays, concessions, collateral free or collateral less loans , lower tax tariffs and other direct benefits to Indian Companies which does not have foreign investments. The adequate financial resources, in the form of high turnover, immense support from Government and easily available debts will prevent the Indian companies to dilute their holdings to a foreign investor. This will help the Indian Companies and Indian products to remain as “Truly Indian”.
Yes! We may need another freedom struggle to make India free from foreign invasions in the form of foreign investments. Wake up and fight, unless we may have to wait for another Mahatma to get back the Kohinoor!
Bijoy P Pulipra
(The author is a Company Secretary, Insolvency Professional and Registered Valuer)