FDI In India: Mouth filling but a Vaulting Horse

Lambodar Prasad Dash

For the first time on August 17 this year, Astro-Physicists, Scientist for the first time detected the collision of two neutron stars, which happened at a distance of 130million light years from the earth. They also found that the collision also produced gravitational waves, light with an abundance of precious metal like Gold, platinum. The most astounding galactic activity divulged on 16^th October, after much research and analysis. Where the precious metals went? Have we received the dust of those precious metals? If received, how much? These questions may seem to be much weird and irrelevant to our discussion

Let’s assume that the collision of those neutron stars is like allowing Foreign Direct Investment (FDI) and its impact on a prevailing economy. Which has some immediate effect and some might be detected in the remote past. After the acceptance of Globalisation and subsequent Economic Liberalisation, Every developing country believed that FDI is like “a cosmic scale atom Smasher of energies for beyond humans ever will be capable to build”( what scientist described the Neutron stars collision) which can bring loads of fortunes to their economy. Yes, of course, since its implementation the FDIs proving as boosters to the economy of the developing and third world countries. All are much pleased with its short-term gains, but like the neutron stars collision many of the issues yet to be experienced. Some of them experienced but remain without explanation. 

Now, come precisely to our topic. I have studied many researched articles and papers on FDI, 80% of them equivocal on certain pros and cons. For the last two decades, since the implementation of FDI in India, the protests and criticisms on FDI remain almost limited to the Political debates. There are research works, but most of them lack inductive reasoning or authentic micro-level case studies on the FDI and its impact on the economy.

Indian Government in 1966 and 1985 tried to allow FDI but it failed.  In the late 1990s, during PV Narshima Rao(PMO)-Dr. Manmohan Singh(FM) severely debt-ridden India allowed FDI under the structural economic reform process. In 2006, under Dr Manmohan Singh(PMO) and P. Chidambaram(FM) further liberalised the FDI inflow through an automatic process, which doesn't need Government Permission but a compliance to Reserve Bank of India (RBI).  In 2013, India government made almost all the sectors open to the FDIs. In the Last two years, Under the Modi Government, it gets much enhancement with high voltage publicity on the name of “Make in India”. The Economic doldrums which arise after the Demonetisation and GST, Modi Government jumped quickly with a data sheet to prove that these reformations increased the FDI inflows. But In 2015, the India overtook China and US as the top destination for FDI.

The Organisation for Economic Cooperation and Development (OECD) defines FDI as to take control of owning 10% or more of the business. Businesses that make foreign direct investment are often called as Multi-National Corporations (MNCs) or Multinational Enterprises (MNEs). An MNE may make a direct investment by creating a new foreign enterprise, which called Greenfield investment or by the acquisition of a foreign firm, either called an acquisition of or Brownfield investment.

Since its implementation, Indian Government insisting on the Technological Transformation/up-gradation, Employment Generation, easing Demand-Supply chain, Revenue Generation besides there is a belief that FDI can be a tremendous source of External Capital which can lead economic development.

Now come to the statistical figures, Research works like Sirari and Bohra (2011) on FDI & growth of service sector in India pointed out the growth of service sector to GDP is directly proportional to FDI. I’m here to point out some casual relationship between gloomy economic issues directly linked to FDI. For it, I’m taking three sectors Innovation, Agriculture, and Micro and small Industries especially cottage industries in India.

Mr. Mukharjee In his research paper quoting  Coughlin, Terza and Aromdee (1989, United States) said that the number of potential sites, state per capita income, manufacturing density within a state, better transportation infrastructure, higher unemployment rates and higher expenditures to attract FDI were positively linked to FDI flows. On the other hand, higher wages and higher tax rates had a negative impact on FDI flows.

However, In the Chinese context, based on panel data covering 98 hinterland cities of China for the years 1999 to 2005, Luo et al (2008) found that well-established factors such as natural resources and low labour costs were not important in determining FDI flows to China’s hinterland. Instead, policy incentives and industrial agglomerates were the most important determining factors for FDI flows.

There is no fixed rule which can attract FDI. It depends upon the variety of economic and Political situation of the invested countries. However, two things are noticeable from the above observations, firstly, the Investors have more decisive role than the government of the invested countries, and secondly, the major attraction for the FDI is low input cost both of Material and Human resources for production and Market. It can be explicitly concluded that the Invested country is always at the receiving end.

When we come to our own country, the FDI inflows to it dominated by the Automatic Route and followed by the Reinvested Earnings and acquisition of shares. FDI through Government approval route is gradually declining year on year basis (RBI, Atri Mukherjee).

Fig-1

In the initial years, the FDI was dominated by the retail sector, but later it is shifted to the Service sector. In 2014-15 the FDI inflows to service sector were INR27,369 Cr, in 2015-16 it increased to INR 45,415 Cr and during 2016-17 (March 31) it is INR58, 214 Cr. Between 2000 and 2017 total FDI inflows is INR316,568 Cr, which is highest among any other investment. This is followed by Computer Software & Hardware, Construction Development and Built-up Infrastructure, telecommunication, Automobile Industry and Drugs & Pharmaceuticals. 

But the India’s International Trade (Export and Import) largely dominated by Mineral fuels, Mineral oils (35% of the total imported Goods and 20% of Exported goods) followed by pearls, precious and semi-precious stones (11% & 12% ) and the top destination for export is USA and UAE, which is around 27% of the total exports. While the top two Importers to India are China and UAE, both contributed 22% of the total imports. It shows that in India, the sectors which attract highest FDI are not helping much in the international trade rather targeting domestic market. Now I place an example how the government is totally zilch on the Innovation and technological up-gradation of Indigenous products. The Lather and Lather products accounted almost 21% of the total exports but the FDI inflow to it is negligible i.e. .02%.

As said by the FDI fact sheet (till 2017, March 31), Government of India, since 2000 the Maharashtra (with some varies) was the topmost destination of FDI inflows with 31% of total inflows to India, followed by Punjab/Haryana (New Delhi 20%) , Tamil Nadu(7%), Karnataka(7%), Gujarat(5%) and Andhra Pradesh(4%). It is conspicuous that the economically advanced states receive Lion’s Share of FDI inflows.

Nunnenkamp and Stracke (2007) found a significant positive correlation of FDI with per capita income, population density, per capita bank deposits, telephone density, level of education and per capita net value added in manufacturing in India.

Fig-2

When we are talking about the employment and income growth, the Per capita FDI inflows has no direct link or an overlapping link to the per capita NSDP or Annual wages per worker. Andaman & Nicobar Island has 0% per capita FDI inflow during 2010-11 but the Per capita NSDP 76,883INR and annual wages per worker is 65,831INR, but during the same period Andhra Pradesh received 679INR per capita FDI inflow but the per capita NSDP is much below than A&N i.e. 62, 912INR and annual wages per worker is 61,007INR. Similarly, Goa Received highest per capita FDI inflows and its per capita NSDP is 1, 68,572 INR and annual wages per worker is 1, 26,788 INR. Although Jharkhand got 0% per capita FDI inflow and its annual wages per worker is much higher than that of Goa i.e. 1, 49,847 INR.

Fig-3

Now come to the Agriculture and Allied sector. The FDI inflows to it are below .58%. The total foreign investment is on fertilizers are .17%, Agriculture machinery (.11%), Food processing industries 2.27% (but most of the food processing industries dominated by meat and seafood). There are a thousand varieties of indigenous seeds and farm animals breeds but very few got patented. Now the foreign investment on Genetic Modified seeds is being encouraged by the Government. Some research works on Madhya Pradesh accused the forceful implementation of GM farming to the growing Farmers' suicide incident (Fig-2). At some point, the most developed States, which also attracts a major portion of FDI is unavoidably linked with Farmer deaths. (Fig-3)

Fig-4

The incoherent government policy on the Agriculture already weakened the Farmer's economy. Now to make FDI more attractive to Foreign Investor's government putting unreasonable pressure on the land to create a conducive environment. 

The investment procedures and double taxation avoidance treaties are the major cause of tax heavens. But the government has paid little interest to eradicate the menace. Even Last year, at several occasions Modi Government reiterated to bring reformations in the Mauritius Route (Fig-4) in FDI but no authentic steps have been taken so far. Rather the FDI has found a new route i.e. Singapore to avoid taxation in India. In the next article, we will discuss on the dark side of this international investment routes. 

Modi’s India: Forging a ‘Blue Whale game’ Land?

Lambodar Prasad Dash

Blue whale is an endangered species, a victim of human activities. It has no direct or indirect link to the recent ‘Sick Blue Whale Challenge App’ which victimised more than 100 teens across the world including six deaths in the month of August in India. However, the testimonials of the 17 years teen girl supposed to be the mastermind of the killer mobile game interpreted the linking of ‘Blue Whale’ to the game. It said, as the blue whale dies eventually when it comes to the edge of the shore at the end of the challenge the victim forced to kill itself by jumping from the edge of the top of a building or any high place.

The girl was arrested by Russian police on 30^th August, 2017. The shocking details of the Killer game revealed by the alleged ‘Mastermind’ exposed many of the weakness of the human mind and its manipulation. According to Colonel Irina Volk, the Russian Interior ministry;

a.       The girl was heading multiple groups

b.      During the search, police found a drawing she made of 22 year old Philipp Budeikin (who was arrested and now in Siberian Jail) the man accused of being the ‘inventor’ of the deadly game, whom she adored as her role model.

c.       The girl said to have played the game herself but did not complete the final stage and choose to become an ‘Admin.’

d.      The suspect hid her identity and Marital status to the victims she made.

e.      In contrast to similar groups, teenagers in this group were blackmailed with death threats against them or their relatives for not completing the tasks.

f.        The accused set 50 tasks for the victims aimed at “Psychologically Traumatising Situations” demanding the victims to commit suicide in the final stage.

g.       The Brainwashing ranges from watching horror movies to waking in the middle of the night and also self-harming.

One of the striking feature of this Killer App as described in the suicide note of the first victim in India who was 2^nd year B Com graduate, “Blue whale is not a game but danger and once entered you can never exit.”

Rising worldwide concern about the deadly Mobile game has laid down some guidelines like;

1.       Not to follow the Crowd and not feel pressured in to doing anything that makes them feel unsafe.

2.       Try not to judge them (admin of the game) by respecting their choices, they should respect yours.

3.       Spend time with friends who say ‘No’...spend time with other friends who also are not taking part.

You might catch an idea what is the ‘Sick Game’ which victimised so many people especially teenagers. Now come to our point, why and how this game is sharing similarity with the BJP led NDA (National Democratic Alliance) government at least with its ideology, style of work and vision. I won’t give unreasonable reasoning like the ‘Blue whale challenge’ gives series of tasks for 50 days having a striking similarity with Narendra Modi’s “50days’ promise to make everything right in India after Demonetisation(!) but some valid issues.

2010, the year saw some widespread rebellion and mass discontent against the government in different countries. Following years of the world economic slowdown impacted many government establishments. The economic growth hampered; many lost their jobs; corporate houses cut short their expenditure; Government also took several austerity measures and reduced their budget allocation on welfare schemes. These issues caused the large-scale unemployment, economic insecurity among the people. In such situation, the growing resentment of the people towards their respective government was conspicuous. During this period India also experienced similar mass resentment, especially among youths.

In 2004, when many developed countries reeled under the recession then government of India successfully tackled the situation and kept intact the economic growth. The people again relied upon the Manmohan Singh Government and mandated for the second time.

The issues which were being prevailed in most of the countries during 2009-10 remained more or less analogous to India however in a lesser degree. But in India, the corruption issue haunted more. Then congress led UPA government undoubtedly took many welfare and pro-people measures but the overabundance of corruption charges overshadowed all the good measures. People easily believed (likely to believe) the testimonials hyped by the opposition political parties that If these corruptions were not taking place, India’s development could have accelerated more.

Between 2009 and 2014 the severity of terrorist attacks increased. If one analysed the terrorist attacks between 2004 and 2009, can find the most of the attacks were targeted Muslim dominated or areas which are sensitive to communal issues {e.g. Jammu Railway station attack(4/1/2004), Ramjanmabhumi attack (5/7/2005), Varanasi Bombing (7/3/2006), Malegaon Bombings (2006-2008), Mecca Masjid Bombings (18/5/2007), Delhi Bombings (2008), Mumbai Terror attacks (26/11/2008)} But during 2009 to 2014 the attacks were sporadic in nature. Whatsoever the terrorist attacks was it exposed the government’s inability to counter it. Alexander Hamilton rightly said, “Safety from external danger is the most powerful director of national conduct. Even the ardent love of liberty will, after a time, give way to its dictates.”

The want of safety and overexposed of corruption had played a vital role to topple the UPA government in 2014 general election. Narendra Modi with his oratory skills and help of RSS (Rashtriya SwayamSevak Sangh) and its fringe organisation well-planned propaganda made people believe that the liberal and secular policies of the UPA government created plethora of problems including posed danger to the majority Hindus and eventually the Nation.

You might have not found any wrong with the BJP, RSS and its Fringe Organisation when they say about ‘Nationalism’, meekness towards ‘Hinduism’, preservation of old Indian tradition and Culture, Over Importance to defence, and abhorrence towards neighbouring countries especially for Pakistan. But before believing these hypes my suggestion is that put a big question, does these issues really followed by them who are propagating? Or the testimonials which are being cited for reasoning are factually true or fictitious emotional appeal? Are they put forth honest descriptions of these issues? These issues can really solve the problems of corruption, unemployment, economic growth, safety?

Now, before finding the answers to these questions I want to quote E O Wilson: “People Would rather believe than Know” descriptively it says, “Emotional Reactions easily drown out and overtake intellectual analysis and fact-based reasoning.”

During the Independence movement in India, many Hindu Organisations wanted to establish a ‘Hindu Rashtra’. Some of the leading organisations also made a secret arrangement with then British-India Government. After the Independence, they also lured some of the feudal states to transfer power to the Hindu organisations. They opposed the secular approach of the Indian constitution. Soon after the Partition and subsequent communal violence, these ‘Hindu Nationalist’ faction got good emotional support from the Hindu Migrates. Although the National Politics kept them at a distance to take hold of the power, the successive governments could not mollify the underneath sentiments towards ‘Hindu majoritarian’ ideologies. The meekness of the so-called secular and left-center political parties towards minority community has been vehemently rejected by the “Hindu Majoritarian” ideologues. They regarded it as “minority appeasement’.

As everyone, at this present juncture is well aware of all these issues, I’m restraining myself to give a descriptive analysis on it. However, It will be more rational to expose you towards the ‘Brainwashing Game’ designed by the BJP, RSS and its Fringe organisations to become a level-headed.

During the 2014 General Election BJP coined the magic words “Achhe din ane wale hain’ (Good days are coming), ‘Nayi soch, nayi ummeed’ (new thinking, new hope), ‘Congress mukht  Bharat’(get rid the country of the Congress), ‘Abki baar Modi sarkar’ ( This time Modi Government) to woo voters. The election has many of its records starting from Narendra Modi’s expensive 3D holographic projection campaign to address rallies throughout the country simultaneously to record turnout of the voters. BJP’s winning as single largest party with 282 Parliament seats also a record itself.

Anybody can deny the fact that the well planned publicity campaign was one of the key factors behind the massive mandate to the Narendra Modi led BJP. Modi successfully persuaded young voters through carefully arranged propaganda. One of such propagandas by manipulating facts is rise of Muslim population. Even though BJP especially Narendra Modi had not commentated openly against the Muslims or support of Hindus but the events of his Political career evidently conveyed ‘Hindu Majoritarian’ intentions and ideologies. Before the general election, the Fringe organisations and Shadow armies of the RSS and BJP disseminated views that ‘Hindu Kahtere mein hai’ (Hindu are in danger). Many postings in different social media overwhelmed with the distorted facts that in India Hindu population has been decreasing and Muslim population increasing rapidly. If this goes unchecked By 2050 India will be a Muslim country. Even many media houses run exclusive news items giving the facts of 2011 census report. Where, the Muslim community had registered a moderate 0.8% growth to touch 17.22 crore in the 10 year period between 2001 and 2011, up from 13.8 crores, while Hindu population had shown a decline by 0.7% at 96.63 during the period. The reasoning further distorted and extended that due to polygamy Muslim Population increasing and they are getting sanction for it from the ‘Tripple Talaq’. By that time some section of the Muslim community protesting against the ‘instant Talaq’ (Talaq e Iddat), not the Tripple Talaq as a whole. Soon Modi took over this issue in his election campaigns (especially during the Uttar Pradesh Assembly election 2016) {fortunately, later Supreme Court in August, 2017 in its historic Judgment nullified the instant Talaq and suggested the parliament to amend the law in this regard} .The Propaganda relating to Increasing Muslim Population has not stopped there, the Station strategist (the outsourced social media experts employed by BJP IT cell for Propaganda) started trolling, putting arguments that the ‘love jihad’ ( where a Muslim youth woos a Hindu or non-Muslim girls to marry with a hidden agenda of conversion). Ironically many educated Hindu Youths became brainwashed by these rhetoric testimonials and taking up arms to counter it. In this context ‘Anti-Romeo squad’ is one of the notorious examples. Similar the case with ‘Cow protection’ and related mob-lynching.

‘Propaganda’ is not an uncommon word. Many know it and interpreted it by their own understandings. The term Propaganda has its origins in the 17^th century efforts of the Catholic Church to propagate its views and stem the rise of Protestantism. It has gone through various permutations since. By the time Hitler was dead and the cold war underway, the word had lost its Godly associations and became a pejorative, connoting mostly the self-serving lies of nefarious tyrannical regimes.

Several Mobile apps designed by the Government of India to sensitize the people about the Government Policies is unquestionably at parlance with “new India” concept, but similar other private apps and social media platforms which disseminating the fictitious and libeled endorsements to brainwash youths is alarming.  

Propaganda traffics mostly in emotions and not just negative ones’. Propagandists appeal to our fears but also to our courage, our hatred and our love. Noam Shapancer, professor of Psychology at Otterbein college who elaborately researched on How ‘Propaganda’ appeals to human mind said, Propagandists use Name Calling, Glittering generalities, Transfer, testimonials, Plain folks, Card stacking and bandwagon.

He also said, “A mind that is not trained to detect and neutralize propaganda is gullible mind, hype for the swindle.” With Similar tactic, but much severity ‘Blue whale challenge game’ victimizing the gullible minds.

Here, some may put an argument that the propaganda for ‘a good cause’ is acceptable, for them, I say, “Good ends does not make it less problematic.” And offer a suggestion, “the antidote to the process of propaganda is finding the factual truth and following the guidelines prescribed to counter ‘Blue whale challenge’.