Security vs growth

No one can deny that India has a serious security problem, but the government's responses in recent months appear both excessive and counter-productive. At the behest of the security agencies, and egged on by local business interests, the government first came up with a proposal on foreign investment in telecom that went far beyond the security-related checks mandated in the most security-conscious countries when it came to issues like allowing telecom firms to access their local networks from overseas and insisting that only Indian nationals would be allowed to man top posts in firms that had FDI above 49 per cent. Now, the National Security Council (NSC) secretariat has proposed that security screening be extended beyond FDI proposals to cover mergers and acquisitions involving overseas partners. So, if the Tatas succeed in their Corus bid, they will have to get a security clearance. Indeed, it is proposed that there be a new National Security Exception Act that will empower the government to suspend or prohibit any foreign acquisition or merger that is considered prejudicial to the national interest. On the face of it, the proposal is unexceptionable; indeed, the justification is that if it is kosher for the US to decide that it does not want Dubai Ports operating there and get the company to divest the US ports it acquired as part of the P&O deal, then it should be okay for India to do the same.

Apart from the fact that it was not okay for the US to do what it did, the Dubai Ports episode is a good example of how arbitrary such national security screening can be. Both the US and India are affected by the same type of terror that is funded by some countries in West Asia. Yet, India has seen no problem in allowing Dubai Ports to carry on operations here--not only has India allowed the firm to take over operations at major ports after bidding for them, there were no protests on even anti-competitive grounds when, after acquiring P&O, the firm got even more ports, taking its share of such container operations in India to over 50 per cent. Similarly, while Chinese telecom suppliers have supplied equipment to one state-owned firm MTNL, presumably it was this very Chinese connection that saw two others being disqualified in the latest BSNL tender!

National security is a complex business and it should be obvious that no one prescription fits all. Insisting that heads of telecom firms and airports cannot be foreigners is hardly a solution--most terror attacks, not just in India but all over the world, have local citizens playing an important role, if not the lead role itself. It is equally true that terrorist organisations have front companies to do business through, so the government must know the details of companies doing business in/with India and Indian firms, but to have unbridled power to disallow any business is an altogether different thing. What's surprising is that while the government was quick to throw out POTA after realising how this anti-terrorist law was prone to abuse, it does not see any contradictions when it tries to bring in similar provisions for those doing business in and with the country.