Multinationals love India more than it loves them

By looking inward, Narendra Modi is missing a huge opportunity

7/3/2020 12:41:00 PM

Officials boast that India has moved swiftly up the “ease of doing business” rankings. But the reality is less impressive

By looking inward, Narendra Modi is missing a huge opportunity

F YOU LOOKat the headline figures, foreign companies still appear to be piling into India even as its economy reels from the pandemic. Since the country went into lockdown in March some $20bn of cross-border deals have been announced, with the likes of Facebook and

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KKR, a private-equity giant, sticking cash into digital firms, solar parks and more. Optimists argue that India could soon become a place to build factories, as firms seek to diversify their supply chains away from China.Yet look closely, and a different picture emerges (see

article). Foreign firms are often on the wrong end of regulatory changes. Investors increasingly prefer to take minority stakes alongside local tycoons, rather than set out on their own. And Narendra Modi, the prime minister, is veering towards a policy of capricious self-reliance. This week India banned 59 Chinese-made apps, including TikTok. Unless things change, India and the firms that invest there will not reach their potential.

India was largely closed to foreign firms between independence in 1947 and liberalisation in 1991—it even kicked out Coca-Cola. Since then it has opened up, tentatively at first, and after 2000 more confidently. Cumulatively, multinational firms have invested over $500bn and some have won control of critically important assets. Vodafone took a majority stake in a big mobile network in 2007. The biggest carmaker is run by Suzuki, a Japanese firm. When Mr Modi was elected in 2014, he pledged to make India even more hospitable and to attract more factories. On paper the Sino-American trade war should make it easier to turn India into a global production hub.

How has Mr Modi done? Officials boast that India has moved swiftly up the “ease of doing business” rankings, from 142nd place in 2014 to 63rd place last year. But the reality is less impressive. India’s share of global foreign direct investment (FDI) flows has nudged up only slightly, from 2.5% in 2014 to 3.3% last year. Meanwhile, some troubling problems fester.

Foreign firms don’t always get fair treatment. True, some that have been active in India for many decades, such as Unilever, are treated like locals. But more recent arrivals can get beaten up. Vodafone poured over $20bn into India but found itself subject to a big retroactive tax claim, unfavourable regulation and, most recently, spectrum levies (some local firms got clobbered, too). Amazon and Walmart, which together have also invested over $20bn, faced a sharp change in the e-commerce rules in 2019 that made it harder for them to own or control inventory.

Because the playing field is not level, foreign firms seem to be shifting from owning their own subsidiaries to taking passive stakes in well-connected local firms instead. Ford has folded its business into a joint-venture. Aéroports de Paris has taken a non-controlling stake in an infrastructure firm. A who’s who of world business has bought small stakes in Jio, a mobile-phone and e-commerce firm run by Mukesh Ambani, India’s richest man, which competes with Amazon, Walmart and Vodafone. Of all the $57bn of cross-border deals announced in the past 12 months, 66% involved passive stakes and half involved partnerships with a tiny number of Indian tycoons. The economy is becoming dominated by a few local winners. According to Marcellus, an investment firm, 70% of corporate profits are made by the top 20 firms, only one of them foreign, up from 14% 30 years ago.

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With the economy forecast to shrink by 4.5% this year and firms prowling for alternatives to China, you may think that Mr Modi would open the door. But his policies have turned inward, mirroring the lurch to protectionism in the West. On May 12th he made a speech which said that India should take part in global supply chains but also mentioned “self-reliance” 17 times. As military tensions with China rise (see

article), a new crackdown has begun. As well as banning the Chinese apps, the government is prodding e-commerce firms to have “country of origin” labelling on goods they sell. Foreign firms bring cash, know-how and competition. Once the pandemic passes, India must show that it is still open for business.

Read more: The Economist »

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Exploitation modern slavery, only India is left for greedy to exploit. When they finish with India only poverty and sickness will be left. That how multinasionals operates. Absolutely not true...The way in India foreign cos are given free hand is amazing.. Is it some propoganda here PMOIndia NITIAayog FinMinIndia

Lol! No one 'loves' anyone. Sab dhanda hain. Economist really have some issue with India. True, protectionism is on rise, but it is more true for a few other countries that get a free pass and pointing it towards India every time shows the agenda. India has been very open toward international businesses.

chinese spam Modi is a neoliberal. What this article really means is that a bunch of people have already invested in India and they want to facilitate as many other investors as possible doing the same so they can make a return. And they want Indian law to reflect that as much as possible. Key amendment to India's anti - corruption legislation has significant implications for multinationals doing business in India.

That's a lie. Sole bad experience doesn't draw this conclusion. Stop berating India for your agenda. As a rule....xenophobic populists can't rule Are you looking for a more sustainable way to invest and make passive income. Our investment is an automated trading firm registered in USA 🇺🇸, where you can invest,get expert traders to trade market on your behalf. You deserve financial freedom Contact

you hv purposely presented unreliable information to tarnish the image of India. I don’t think u know the full facts of Vodaphone case, possibly u hv been asked to advocate their case, & easiest way is to go on character assassination. Stop such practices. Screw me once shame on me rape me twice shame on me even more or something like it🤡

Another stupid article by Ecnomist. How much money are you getting from China that you have to publish this crap. If you make the business pertinent for local market, it will work. Stop doing China’s bidding as Indians are shunning some Chinese apps and businesses. It's called politic ! West specially America invested hundereds of billions into China as result their techs companies have been robbed and destroyed by likes of Huawei who first hacked and destroyed Nortel canadian tech giant copied cisco technology instead of investing in India which is a democracy

TikTok Banned In India: How Social Media Influencers Are Protecting Their FinancesVideo-sharing social media platform TikTok facing a ban in India has brought the spotlight on the financial security of social media influencers in the country. How secure are their finances as influencers, and if you are dependent on social media for your earnings, should you worry? They're not. The scam is up. Brands cant afford to give them money and freebies anymore for maybe some exposure to their fake follower counts. kaborankin

China-India clash marks a huge regional shift and Pakistan is its epicentrePakistan finds itself in the middle of the 21st century's defining geopolitical war, and the strategic implications for Islamabad are huge. tomthehack Two places that treat muslims like crap end up having to fight each other, it's the irony that gets me tomthehack tomthehack Kashmir belongs to India...

Chinese Apps Get the China Treatment in IndiaU.S. internet giants have been locked out of China for years. Increasingly, Chinese apps may find themselves locked out of the rest of the world. Good. I don't get why ppl wear mask if they leave the nose open. I don't think its a problem actually.

Apple supplier Foxconn, others hit as India holds up imports from China: sourcesIndia's additional scrutiny of imports from China has disrupted operations at plants owned by Apple supplier Foxconn in southern India, three sources told Reuters, and other foreign firms are also facing delays as tensions between the two countries build. Hundreds arrested Scenes you've never seen before 😞 Fake news Good news for China

China's Twitter-like service Weibo removes Modi's account at the request of IndiaChina's Twitter like service, Weibo, has removed Indian Prime Minister Narendra Modi's account at the request of the Indian embassy in Beijing. When will we stand up and call a spade a spade? modi is afraid the virus in app, which can be used for eavesdropping Sina Weibo

Asia Today: Cases rise in locked Australian suburbs, IndiaA coronavirus outbreak in Australia's second-largest city continued to grow Thursday and the Northern Territory detected its first case in three months. Northern Territory Health Minister... Keep fighting Australia don’t let your guard down detected its first case in 3 months? and this is coupled with the first part why? this is more fear mongering. It is not a coincidence that this clown is running that state.