Attracting Foreign Investment

Attracting Foreign Investment By Mohit Satyanand 17 August 17, 2009 Happy Independence Day! In his August 15 speech to the nation, Prime Minister Manmohan Singh made more than one reference to the economy. Firstly, he acknowledged the depth of the crisis the current drought posed to the farming community, and pledged that the government would extend aid to the agricultural sector. Secondly, he reiterated his commitment to steer India back to a path of 9% growth. In order to this, he stated that India would attract foreign investment. It is unfortunate that, 62 years after Independence, a country with one of the highest savings rates in the world should still need to bank on foreign investment to achieve growth targets. Clearly, much of our saving has been misdirected into unproductive expenditure. But, to stay with the issue of attracting foreign funds: it is natural for funds to move from areas of low growth to those of high potential growth. Over the last few years, India has become increasingly attractive for those seeking to return in the so-called Emerging Nations. At the same time, one pause to consider why one of our largest, and most highly-regarded industrial groups, the Tatas, have, during this same period, made most of their big-ticket investments overseas. The same is true for the Aditya Birla group, who rank next only to the Ambanis and the Tatas. I have the sense, from highly-placed individuals within these groups, and outside, that one of the major reasons for their increased growth overseas is the frustration with dealing with the arbitrariness, tardiness, and blatant corruption of Indian governance. The Ambanis, on the other hand, seem to have thrived in the Indian milieu, with most of their bigticket investments in the country, But now that the Ambani empire has split, and it is Ambani vs. Ambani, the depth of the nexus between industry and politics is revealed. The fight over gas between the Ambani brothers was judged by the Bombay High Court. The elder brother took the matter to the Supreme Court; seeming to weigh in on the elder brother's side, the Ministry of Petroleum decided it wanted to be part of the case. Now, the country's largest electricity producer, NTPC, largely owned by the Indian government, feels that a judgement in favour of the elder brother will imperil its supply of gas, so it is leaping into the Court, too. I am in danger of simplifying matters here, but what we now seemingly have is, in the highest court of the land, on one side, Mukesh Ambani and the Ministry of Petroleum; on the other side, Anil Ambani and NTPC. Brother vs. brother, and Ministry vs. government-owned company. A great background under which to attract foreign investment.