A V Rajwade: Indians abroad

The stark contrast between our success outside India, and the poverty in which a large number of Indians live in India, is worth pondering over.

Look at the following headlines from just one week's newspapers: "Tatas pick up Eight O'Clock for $220 mn"; "Reliance Comm set to invest $60m in S Arabia"; "Uttam Galva eyes US buys"; "UB has ¤500 mn for Europe buy"; "RIL plans Rs 3000 cr Venezuela JV"; "ONGC may buy 5% in Rosneft IPO for $4 bn"; "Essar Steel to invest $1.5 bn in West Asia"; "Godrej Consumer buys Rapidol's S Africa unit"; "Monnet Ispat plans acquisitions in Africa, East Europe"; "Videocon set to acquire Daewoo unit worldwide"; "India third largest investor in UK." I have excluded the booming IT sector which has made the largest number of foreign investments, although most of the individual amounts have been smaller. On the other hand, Tata Steel's now abandoned $2 bn project in Bangladesh is also not part of the list. In 2005, Indian M&A deals abroad totalled $4.5 bn and were even higher in Jan-June 2006 at $5.2 bn (source: Grant Thornton). At this rate, one would not be surprised if, in the near future, India's direct investments abroad exceeded the FDI inflow!

While the Left has often been critical of FDI inflow in general, one has not seen much criticism of Indian companies' takeovers (or investments in greenfield projects) abroad. If inward FDI is against the interest of our working classes, surely it is equally bad for the countries recipient of Indian investment? And, as principled ideologues, our Leftists should be opposed to that as well. Interestingly, one of the few communist-ruled countries in the world, mainland China, is by far the largest recipient of FDI in the world.

The Indian media and, indeed, the government itself, took a lot of interest in the long-drawn-out and ultimately successful takeover of Arcelor, the large European steel company, by Mittal Steel. While the interest displayed by the media is understandable, one is not quite sure whether it was advisable for our esteemed commerce minister to bat for Mr Mittal. First, while an Indian citizen, and obviously a person with strong cultural roots in this country, he has had little business connections with India since he started in Indonesia a quarter century back. (His family does have business interests in the country and Mr Mittal himself is planning a greenfield project in Orissa.) In reality, Mr Mittal is a truly global businessman, only incidentally sticking to an Indian passport. Have we gone somewhat overboard in painting his concerns and successes as if they were India's? And, more pertinently, will the commerce minister's statement about "equal treatment", etc. come to haunt him, and the government, when tomorrow the French come to lobby for freedom for their banks and other businesses to invest in India? The world's second largest, and multinational, retailer Carrefour is a French company. Retailing apart, our own record in terms of welcoming foreign investment has, at best, been spotty and we surely do not have the right to lecture others about welcoming foreigners' investments! (Incidentally, more than half the top Mittal executives are of Indian origin and experience, quite a few from the public sector. This once again emphasises that the weaknesses of the public sector quite often lie elsewhere than in the quality of its individual executives.)

But to come back to where I started, namely the growing flow of Indian direct investment abroad in sectors ranging from IT, to manufacturing, to metals, to pharmaceuticals, etc. there is one marked difference from the days of the licence-permit Raj. In those days also, several business houses (albeit in much smaller numbers than now) established joint ventures abroad""because the licence permit Raj stopped their expansion within India. Broadly speaking, with the exception of the Aditya Birla Group, too many of them failed. The record of Indian banks abroad too has been patchy. (Incidentally, it was good to see the new SBI chairman eschewing overseas takeovers, at least temporarily""to my mind, the risk/reward relationship is too skewed.) Brought up in an economy where enterprise consisted of getting a licence or permit, and not of manufacturing a better widget, most of them failed. The situation today is different. The driving force is backward or forward integration, access to new markets, etc. Again, Indian businessmen have operated in a relatively free economy for the last 15 years and are much better used to living with competition than in an earlier era. Overall, their record in this second wave of overseas investments, one hopes, will turn out to be better than that of an earlier generation""provided they learn to adjust to cultural and environmental differences. They would also face problems of threatened takeovers (IOC in Sri Lanka), legal cases (Ranbaxy in more than one place), product liability claims, etc.

The corporate sector apart, another point about Indian immigrants overseas is that they have prospered in economies, cultures and regulatory regimes as different as Africa, Europe and America. In that most competitive economy in the world, namely the United States, people of Indian origin are the richest ethnic group, richer even than the Jews. In the Jewish stronghold of the diamond business also, Indians have matched the traditional Jewish merchant in Antwerp, Hong Kong, the US, and indeed the world.

And not just businessmen: Indians seem to be doing equally well in corporate careers, academic fields, and professions abroad. Having lived and worked in this country as well as abroad, the stark contrast between our success outside India, and the poverty and misery in which a large number of Indians still live in India, is worth pondering over. Perhaps there are two reasons. For one thing, immigrants are, almost by definition, people of initiative and more hungry to "do well" than the stay-at-homes. (And, this is not only a cross-border experience""we see this within India itself. The Marwari immigrant in almost every state in the country is more prosperous than the local people.) There is probably another reason for the Indian success abroad""the regulatory regime does not inhibit, indeed facilitates, their efforts to better their lot, providing a level playing field.

avrco@vsnl.com