It's no secret that Indian investment abroad, especially in post-imperial Britain, does very little for India. Yet, talking to Swraj Paul at the Institute of Directors' dinner in Delhi, I was reminded sadly of the Lancashire saying "clogs to clogs in three generations" meaning the energy and ability to build and sustain a fortune often doesn't last beyond the third generation.
Not that the tragic death of his youngest son, Angad, after Caparo Industries collapsed with debts of more than £160 million will force the billionaire peer to revert to making steel buckets in a small foundry in Jalandhar. Nor does the disintegration of Tata Steel's European empire mean Ratan Tata can't always find a Sanand in Gujarat if he loses a Singur in West Bengal. But these failures, like Rajat Gupta's catastrophic fall after a meteoric rise, must say something about the entrepreneurial quality of Indians.
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Nevertheless, I can't deny the involuntary twinge of pleasure 60 years ago on seeing "Nizam of Hyderabad" on a gatepost in Millionaires' Row, as Kensington Palace Gardens was called, on learning of the Gaekwad of Baroda's controlling stake in Fortnum & Mason, or when a cabbie pointed out the St James' Court Hotel, which "had become very run-down until the Indians took it over". Even the Rs 240-crore junket that French journalists called "the vulgar wedding of Versailles" seemed a national achievement. After all, ArcelorMittal was rated the world's biggest steelmaker.
Yet, I also wondered if these boasts had any substance. Most expatriate luminaries who make money from readymades, hotels or mysteriously moving stocks and shares proudly call themselves philanthropists. A few even claim the halo of a freedom fighter. But how many jobs have the Pauls, Hindujas, Nat Puri, Raj Loomba or Joginder Sanger created in India? Have they boosted exports or impacted at all on Indian life?
Swraj Paul rightly told Manmohan Singh he had pioneered globalisation long before official liberalisation. P V Narasimha Rao assured Singaporeans he had convinced the so-called Bombay Club that his reforms would not only mean a bigger pie for everyone but also allow Indian businessmen a slice of the global pie.
So we have two parallel phenomena. First, expatriate Indians legitimately generating wealth, which they use to buy influence with the government at home. Second, domestic companies like Adani, Lodha or Tata acquiring assets (land, businesses, installations, mines) all over the world.
The Organization for Economic Cooperation and Development calculates that India received $212.7 billion in overseas investment between 2006 and 2012. About half that amount - $103.3 billion - was sent out during the same period, not counting surreptitious transfers to laundering hubs like Mauritius and Singapore. But legal or illegal, the net effect makes nonsense of Narendra Modi's Make in India and Skill India boasts.
I have no problem with either emigration or globalisation. All through history, adventurous souls, especially those who haven't done too well at home, have sought their fortunes abroad. There would have been no United States of America otherwise.
As for globalisation, I grew up staring at "Dorman Long" stamped on the iron beams of our bungalow in Calcutta. That name recalling the era of English imports because nothing was manufactured at home still lurks under the layers of mergers and amalgamations, takeovers and nationalisations, closures and sales that have turned the Tata Steel wheel full circle to resurrect British Steel in Britain.
As the Reserve Bank governor just before Paul made his Rs 13-crore bid for DCM and Escorts, Manmohan Singh declared that India needed "a substantial inflow of resources from abroad both to supplement domestic savings and to finance the deficit in our balance of payments". But while identifying "a positive role for investments by non-resident Indians", he stressed "it is necessary to protect well-managed companies against takeover bids from abroad".
Singh left unsaid that the bids could also be by disguised round-tripping domestic capital.
Two other questions remain. First, Caparo's collapse, like Gupta's fall, or the dismantling of Tata Steel's European operations may indicate some inherent Indian flaw. Second, I cannot but wonder how India is helped by the £6.2 billion Tata spent in 2007 to take over the Corus Group and the further £1.5 billion poured into its operations in Britain. Tata's British assets are now described as almost worthless.
Of course, unlike the Nizam's house in Millionaires' Row or the Gaekwad's Fortnum & Mason holding, the waste is of corporate funds. But it is money raised in India from Indian taxpayers. It should be used for Indian welfare. Does investment abroad achieve anything beyond the dazzle?
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
