Tuesday, May 17th, 2022 07:06:36

What Blocks Global Investment In India

Updated: April 3, 2010 11:59 am

In this causally-connected neo-liberal world, any real-estate dilemma in Europe or the US can make the Asian stock indices jittery. Similarly, any socio-political imbroglio in Asia or a coup d’etat in Africa may constrain the investment capacities of multinational corporations based in the West. Considering the immense potential as a consumer market, India can serve as a case study in this regard.

            The insurgency fomented by Taliban and al-Qaeda in Afghanistan and Pakistan has proved detrimental to the growth of these nation-states with foreign investment dipping abysmally due to the precarious security conditions. The chain of insurgency aperiodically spills over to neighbouring India in the form of cross-border terrorism. Ironically, India at present finds itself endangered more due to the leftist insurgency rather than the former—as far as global investment is concerned.

            The Maoist menace of 1967 is haunting India yet again and consequentially the world too. At that juncture, the movement was temporarily curbed by the state apparatus.

            Since 2004, however, the Maoists have upped the ante and extended their dominions to penetrate large swathes of the Indian landmass. Presently, about one-third of the districts (substantially tribal dominated and rural) in India are under the Maoist Influence. The area stretches from the Indo-Nepal border in the north to the southern part of the subcontinent. Incidentally, this area is rich in mineral resources.

            The Maoists

staunchly oppose any form of market liberalisation and global integration of goods and services. They view globalisation as a powerful vehicle that assaults tribal culture and threatens their socio-economic existence.

            Naturally, they are opposed to mega projects by transnational corporations. About $20 billion Foreign Direct Investment (FDI) being poured in by global steel giants like ArcelorMittal (Luxembourg based) and Posco (of South Korea) is hanging in balance due to the hurdles in acquiring spaces in the rural hinterlands. An attempt by the Indonesia-based Salim Group to set up a chemical hub in a Special Economic Zone (SEZ) was thwarted in 2007. Domestic corporations like the Tatas and the Vedanta group are facing strong opposition by the Maoist-backed tribals.

            The robust propaganda machinery as well as the armed militia of the Maoists deters the growth of infrastructure and development in the rural zones of the subcontinent. Though they speak up for lack of development of the Indian peasantry, they tend to impede growth in the long run citing ideological reasons.

            India is in definite need of FDI along with the concomitant infrastructure. In 2009, total FDI inflow into India as per the estimates of Ministry of Commerce and Industry amounted to $19.9 billion (until August). China, on the other hand, mustered an FDI up to four times in the same period.

            The contribution of the secondary sector towards the overall Gross Domestic Product (GDP) in India has been hovering around 28 per cent for the last seven to eight years. And with the declining contribution of the antiquated agricultural sector (as low as 17 per cent in 2007-08), India needs to boost its manufacturing domain so as to climb up the ladder of industrialisation. In that direction, FDI is imperative.

            Prime Minister Dr Manmohan Singh has been the poster boy of the LPG (liberalisation, privatisation, and globalisation) policy of the government. In fact, since 1991, he was a proponent of opening up India. It is not only the Indian State that is confronting a major challenge but Dr Singh’s credentials as a suave economist is also at stake. Returning back to power in May 2009, the present government had a formidable task to tackle the left wing extremism which had emerged, according to Singh, as the “biggest internal security threat”.

            Alarmingly, though the ultras prima facie despise globalisation and liberalisation, they are going ahead in forging a pan-South Asia network of terror. There are reports of a covert alliance of the almost decimated Liberation Tigers of Tamil Eelam (LTTE) and the Maoists of India. The sagging LTTE may want to bolster their structure through a fresh base in South India, close to the Lankan landmass whereas the Maoists would seek to cash in on their land warfare expertise.

            Any further alliance of sorts of this combination with the Pakistani-based jihadi groups would prove ominous to both India and the US as the Taliban and al-Qaeda would then find sanctuaries in India.

            Already, it is established that the Nepalese Maoists have close strategic and military links with their Indian counterparts.

            Recently, the Indian Home Secretary suggested that small arms and ammunition from China are being smuggled into India to feed the Maoist rebels. This opens up a completely new dimension of the quandary. The disturbed political climate between India and China might suffer another blow from this angle with the already prevailing milieu of distrust.

            The solutions to this anarchy are not lineal. Analysts and experts have opined that the Indian government needs to have unconditional talks with the Maoists. Honest efforts have to be made on the part of the mainstream to bring the tribes within the social pale. The huge tracts of land housing mineral resources need to be holistically dealt with.

            Furthermore, the government can broker a deal between the tribes and the transnational enterprises (TNEs), with a win-win scenario for both. On an encouraging note, India has seen successful instances of contract farming ventures by TNEs like PepsiCo, Unilever, and Cadbury.

            India cannot veer away from the development paradigm of interconnectedness with the global economy that it had embarked post-Cold War. Similarly, the Leftist rebels have to appreciate the inevitability of integration of the tribes with their urban counterparts. India is on the track of globalisation and there cannot exist any undeveloped islands within its topography. If the subcontinent has to grow in double-digit and the world has to benefit from its growth both as a consumer market and a knowledge powerhouse, then the Maoist menace needs to be sorted out expeditiously.

By Uddipan Mukherjee

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