Foreign investments and India

I have been in the USA for about 2 and a half months now, and am eagerly looking forward to returning to India, which will be in another fortnight. My stay here has benefited me in many ways, but more importantly I got to see India in the light of a foreign culture. Many people here have a very wrong image of India in their minds. For some, India is just another developing country which supplies cheap labour to theirs'. There is no doubt, a hint of truth in this statement, but such statements coming from ignorant fellows makes no sense. Such facts are somehow instilled into their minds and they cannot notice India's position in the world today. Let me focus on something that is of relevance both to them and us Indians - foreign investments in India, which are a major factor in India turning global.

As is not surprising, the news about India that an average learned American gets here is all the bad stuff - the bomb blasts, communal riots, crime, political confusion and a bite of the Indo-US nuclear deal. Sometimes I feel a major people of this country inherits its views on a country, or for that any other matter, from their President, who is probably the worst-informed among all those I know. They should not mix Mumbai's train blasts and its communal riots with the successful financial condition of the city. The Naxal attacks in AP shouldn't be jumbled up with Hyderabad's success in the IT industry. Most Indians never mix up the goofy Bush administration with USA's successful industrial growth and high standard of living. Things ought to be looked at in their right places.

Coming back to our topic of foreign investments, one may notice that most investors are willing to invest in India's southern states, and not so many in the North and north-east part of the country. One reason could be the successful lineage that people from South India have managed to establish abroad, and also that the southern states are more stable politically and economically than their northern counterparts. Another concern for investors is the Leftist rule in India, which slows down economic growth. With a leftist rule in India, investors look at the government falling near to the point of collapse on numerous occasions. But if one thinks more carefully, India has better off having the Left in power, rather than in the opposition, where it can create more problems for India's progress, including strikes and agitations across the country, resulting in deterring foreign investments.

Another problem that investors face I think is the bureaucracy in India. Information about security of their investments in India also is not easily available to the investors, and whatever is available is also not all that reliable. India should not rely on the media to provide this information, but the government should take up this matter and establish good communication and law and order for investors. Besides this, I think India also needs to improve its policing system to draw in more investments. The New York police has witnessed lots of changes in the late 19th century because of the needs and efforts of a small group of citizens who were frustrated with the level of corruption and politics in the department, and the department has fused well with the industrial and community needs of the city, contributing to its progress. It is important that India also takes some steps in this regard. The police should be given more operational freedom without compromising on their accountability. We need more policemen like Julius Ribeiro and KPS Gill who being good servicemen, are also quite active in community service. A good rapport between the police and the industrialists in India is necessary to convince foreign investors to invest in India.

Let us now focus on the current scene of foreign investment in India. Almost 17% of the top 200 stocks in Indian markets are owned by foreign investors. In most top companies in India, foriegn investments have either reached the maximum limit or are almost about there. This is causing concerns, both on a patriotic and strategic level; it is sad to see foreign domination in Indian markets, and also to know that Indian players have not much of a control on the market, that control lying in the hands of few persons sitting in London, Montreal or New York. Besides, when there is a case of such an over investment in a firm, domestic players are also noticed to lose interest, resulting in a waning sensex over a period of time. Such over investment also has had good effects. Now India's domestic assets in equity are a mere 2% compared to 7% when the liberalisation policy was newly announced in 1993. This simply means that industrialists in India now have more capital available than before. This has not discouraged foreign investors too, who believe that retail ownership will still see a rise in India.

Besides, Hedge funds have been showing interest in India in recent times. India offers money making opportunities to them, that have become rare in USA and Europe. Hedge funds are looking at huge investments in Asia, primarily in India, as the market here is more fertile than in China, due to the growth of the derivatives market in India. This is seen as something that might hugely contribute to India's growth in the coming few years.

Thus, India is no longer a mere little developing country in the eyes of most industrialists throughout the world. Indian markets have never had so much diversity in the opinions and addresses of foreign investors. It's high time that people across the world start taking notice of India's role in the global market, lest it be too late.