New Delhi, January 26, 2021: The Republic Day is here. It’s that time of the year again to proudly look up at the fluttering national flag and passionately celebrate the big occasion.
Yet, it’s also time for a certain reality check on this big day. It’s time for us, as Indian citizens, to collectively wake up from a deep slumber. A mass hypnosis, rather.
It’s time to realise that the economy of our cherished motherland has been firmly recolonised by an international network of foreign, profit-making companies based in countries from the Western world to the Far East.
It’s the bitter truth. So bitter that it doesn’t come up in our daily discourse.
Of course, we are not colonised in the administrative or textbook sense.
We have been joyously mark Independence Days and Republic Days since getting freedom from the opportunistic British in 1947. We elect our own political leaders. Our courtrooms are run by people from among us. Our bureaucracy is indigenous. In theory, we are a free and independent country.
But the economic reality is quite different.
Since 1991 – when the doors of the Indian economy were thrown open for foreign corporates to rush in – we have unwittingly allowed thousands of international businesses to set up shop across the country.
As a result of that move, we have gift-wrapped a large chunk of our economy and handed it over to these external players.
INDIA: A MODERN COLONY OF FOREIGN COMPANIES
Before we deep-dive into the pros and cons of this inward rush of foreign multinational companies (MNCs) or transnational companies (TNCs), we need to acknowledge the fact that the Indian economy is not free at all.
Large sections of India’s economy – or India’s marketplace – are now colonies and playgrounds of powerful foreign players.
It’s difficult to get the exact number of foreign businesses operating in India. The corporate affairs ministry no longer puts out on its official website an updated list of international companies that have a foothold in India.
But according to latest media reports and independent research, it’s estimated there are over 4,000 foreign companies with some form of presence in the Indian marketplace.
This list of 4,000+ includes: foreign companies that directly have operations on India soil; foreign companies that have partnered with India’s domestic companies leading to a breed of FCCs (foreign-controlled companies); and foreign companies that operate in India through shell or cover companies that only appear domestic but are actually not (it’s almost impossible to prove the third lot’s presence through paperwork).
China, the United States, Russia, the United Kingdom, Japan, South Korea, Singapore, Germany, France, Australia, Italy, Canada, Taiwan, Switzerland, Spain, Israel, Belgium, Austria, Hong Kong – many of the companies that have a foothold in India are mainly headquartered in these countries/territories.
In some sectors of the Indian economy, the foreign players have moderate influence; while in some other areas, they run the show, dictating terms to the vast Indian consumer base as well as to administrations.
Take any industry, for example. From everyday confectionary stuff to fashionable clothes we wear to high-end defence equipment to social media apps, the recolonisation of India by foreign corporate players is taking place full steam.
The prowl of the big cats of global capitalism in urban India is so ‘internalised’ in our culture and lifestyle that we hardly realise we’re being groomed by these external business interests to serve their interest as devoted customers.
Our state governments and central government are technically free from direct political and administrative control by foreign governments. But access to our economy – our collective financial wealth – is mostly in the hands of overseas-based multinational companies (MNCs) or transnational companies (TNCs) that have recolonised us.
One might ask, so what’s wrong if foreign companies do business in India?
After all, aren’t they generating local jobs for Indians by setting up offices, branches, shops and factories in the country?
Aren’t they bringing in money from outside and investing it here?
Aren’t they giving us a refreshing variety of products and services from different corners of the world to choose from?
Aren’t they manufacturing products right here in India?
Aren’t they paying taxes to the Indian government?
Aren’t they connecting Indians to the world around us?
Yes, these are contributions. But while they are opening up our window to the world, they have also prised open our economy and are making phenomenal amounts of money from the business they conduct here.
What we financially gain from the foreign companies’ presence in India is by a long way outweighed by what we lose due to their presence.
HARD TARGET OF SOFT DRINK GIANTS
To understand how we suffer a huge overall loss, let’s look at any popular foreign brand.
Let’s start with global soft drink giants Coca-Cola and Pepsi, which are immensely popular consumer goods all over India, especially among youngsters, right from the urban space to far-flung suburbs and districts.
For every bottle of soft drink that Coke or PepsiCo sell here in India, they make a certain profit. Out of that profit earned per bottle, one part goes to the Indian government’s coffers as taxes. One part is reinvested by the company into its operations in India to expand its business here. And a third part of that profit (which is often the largest part) is dispatched to the countries where the soft drink companies are headquartered.
In the case of Coca-Cola and PepsiCo, the money that is made here in India is sent all the way to the US. Basically to American banks.
Now multiply that ‘take-home’ profit from that one bottle by the lakhs and lakhs of bottles that these two American companies sell in India each year.
The final sum of the profits that Coke and Pepsi transfer to their home country – partly to US banks and partly to tax havens around the world – runs into millions of dollars annually.
It’s crucial here to understand what’s actually happening.
The two companies are transferring the wealth earned in India to overseas banks or foreign reinvestment hubs. So basically, India is ending up leaking financial wealth like a sieve by consuming their (nonessential) products. And that perpetual transfer or outflow of financial wealth from India is directly resulting in the country’s deepening poverty.
It’s not rocket science. It’s simple economics. Only that we are not told about it in simple terms. Perhaps there are forces that don’t want us to know this incredible thing in simple terms.
Now, take a step back and look at the larger picture of the Indian marketplace to make sense of how much financial wealth gets drained out of our country every single day.
With 4,000+ companies carrying out this same wealth-siphoning ‘exercise’ – selling or dumping goods and services here and transferring the revenue earned to their respective home countries’ banks or to foreign tax havens or reinvestment projects – the total volume of financial wealth that we leak every minute, every hour, every day, every week, every month, every year is mindboggling.
Some of the most prominent and celebrated foreign brands that are deeply engaged in conducting business across India are: Microsoft, Google, P&G, Nestle, PepsiCo, Coca-Cola, Britannia, Cadbury’s, Sony, Panasonic, Apple, Hewlett Packard, Dell, Amazon, Facebook, Intel, Twitter, Siemens, LG, Samsung, Amazon, IBM, Adidas, Nike, KFC, McDonald’s, Hyundai, Toyota, Volkswagen, Suzuki, GM, Nissan, Levi’s, Pepe Jeans, Pfizer, GlaxoSmithKline, Johnson & Johnson, Deloitte, E&Y, Bata, Unilever, Citi Bank, Deutsche Bank, Standard Chartered Bank – the list just goes on and on.
THE TRAGEDY OF TRADE
Outward wealth transfer by foreign companies in India, FCCs (foreign-controlled companies) in India, and shell (or hidden foreign) companies is not the only way in which India is leaking financial wealth.
There’s another way in which money flows out of the country – and big time. It’s through the import of goods and services from companies based abroad.
The way to map the outflow of India’s financial wealth, or rather whether the country suffers a net outflow of wealth or a net inflow of wealth, is to follow at the latest ‘balance of trade’ data.
Balance of trade of a country refers to the difference between its overall export of goods and its overall import of goods in money terms.
If the exports exceed imports, a country is said to be enjoying a ‘surplus’ in its balance of trade – it means more money comes in (through exports) than goes out (through imports).
On the other hand, if imports exceed exports, the country suffers a ‘deficit’ in its balance of trade – it means more money flows out (through imports) than comes in (through exports).
Data on India’s balance of trade over the years clearly shows that India has consistently and historically been a net importer rather than a net exporter. It has generally reported a deficit rather than a surplus, with the latest available data as of July 2020 showing a balance of trade deficit of $4.8 billion (Rs 356 billion).
Going by data available from January 1957 to July 2020, India’s balance of trade has averaged at a deficit of $375 million (Rs 27.8 billion).
It shows the country has perpetually seen a drain of financial wealth – which is mainly a result of the money outflow from the goods and services that are dumped in India by foreign companies and foreign-controlled Indian companies.
Since we are discussing the concept of balance of trade, it is worth noting that June 2020 was a dramatic break from norm for India, with the country recording a rare surplus for the first time since 1976-77 – at $793 million (Rs 58.9 billion).
The reason behind this anomaly or miraculous trade surplus was the impact of the Covid-19 pandemic.
With large parts of the world going through lockdowns and an international trade freeze in place to stop the spread of the coronavirus, foreign players didn’t get the scope to dump products in India.
As a result, the global trade freeze caused India’s overall imports during that month to fall below its overall exports.
But as the engine of global trade slowly began to roll July 2020 onwards, India began to import heavily as usual and its trade surplus turned to trade deficit again.
GLOBALISATION OF LOOT?
We always celebrate the concept of ‘connectedness’. It is human nature to mingle, to reach out to the unknown, to build bridges, to explore different cultures, to not be withdrawn as closeted societies but to interconnect and form a global village.
That’s how human civilisation grows. But we gain from this interconnectedness only at the individual level and not at the macro level.
At the micro level, ‘globalisation’ is a win-win situation for all of us because the exchange of ideas and cultures enriches us as individuals. The more the differences in culture, the more we celebrate them.
But at the macro level, to be precise, at the country-level, globalisation is not a win-win situation for all countries. Rather, interconnectedness or globalisation gives rich and powerful countries the scope to financially dominate poorer and weaker nations.
That brings us to the concept of what is popularly called ‘dependency theory’ – which goes to the root of why some countries perpetually suffer trade deficits and why some others perennially enjoy trade surpluses.
The origin of the dependency theory has its beginnings in two papers written in 1949. The papers were authored by Hans Singer, a German-origin economist from the UK, and Raul Prebisch, an economist from Argentina.
According to the path-breaking theory, some countries always remain financially drained because resources flow from the ‘margins’, which are poorer nations, to the ‘core’, which are affluent countries.
Basically, the powerful countries get richer at the expense of the weaker nations.
The theory argues that this imbalance of powerful countries dominating weak countries and siphoning their financial wealth results from the fact that the two sides are integrated – rather over-integrated – into a common global system.
As a result of the integration or interconnectedness, weak countries are unable to break free from the influence or orbit of powerful countries, which exploit them financially through terms of trade that are rigged to help only the powerful nations.
That’s the crux of the dependency theory. Back in the 1960s and 1970s, this theory, also known as the Prebisch-Singer thesis, helped economists and social scientists get to the bottom of why some countries in South America were getting impoverished.
The same theory now helps us understand why India continues to remain so poor – mainly because we are way too integrated with a ‘rigged’ world system in which the terms of trade are heavily tilted in favour of powerful export-dependent countries.
WHEN INDIA WAS NOT COLONISED
A good way of gauging how badly the Indian economy is performing is to turn the clock back by a thousand years.
In the year 1000 CE, several empires were running the Indian subcontinent. It is well documented that for a 1,000-year period from around 1 CE to around 1000 CE, the economy of the Indian subcontinent was estimated to have been the largest in the world.
In 1000 CE, the region’s estimated share of the global GDP was 28.9%, which is incredible by today’s standards.
The data signals that the region was indeed the wealthiest place on Earth at that time.
Seven centuries down the line, when the Mughals were in power during 1700, Mughal India and the Chinese empire were jointly the two biggest economies on the planet – each region enjoying nearly 25% of the global GDP, and each one staying marginally ahead of the global GDP share of the whole of Europe put together.
But the Indian subcontinent’s firm grip on prosperity began to drastically weaken when colonisers from the western world started to make inroads here – first through the East India Company over a 100-year spell from 1757 to 1857; and right after that a 90-year reign by the British monarchy from 1857 to 1947.
When India earned freedom from British rule in 1947, its share of the global GDP stood at an unimpressive 3% – testimony to the financial plunge that India suffered under the British Raj.
Right now, India’s share of the global GDP stands at just 4.7% – far below the bright days of a thousand years back. And India’s clout globally is negligible because of the negative impact of free trade on the country and the presence of thousands of foreign business players that are pumping away financial resources.
1991 – THE START OF INDIA’S RECOLONISATION
Behind every major economic phenomenon lies a turning point. For modern India’s deepening economic misery, the year 1991 was that turning point.
That was the year when ‘economic liberalisation’ was brought about with aplomb.
While the mainstream narrative hailed India’s liberalisation starting in 1991 as a welcome move to resuscitate the struggling economy, the reality was something different, grim and alarming.
On paper, 1991 onwards India was throwing open its stagnant economy to dynamic foreign investors, ending a regime of import tariffs, reducing the burden of over-taxation on big businesses, and allowing stifled markets to run freely without the state’s interference.
All that looked good. But only on paper.
In reality, the government’s decision to pave the way for liberalisation saw a red carpet being rolled out to foreign businesses so that they could tap into India’s vital financial resources and soak it up.
Once the economy was opened up, hundreds (and later thousands) of foreign companies set up shop directly or paired up with indigenous companies to start minting money here – eventually transferring much of that financial wealth to their home countries.
Liberalisation also saw India opening its doors to an unregulated import of goods and services from countries far and near. It sparked a phenomenal financial drain as imports outweighed exports, triggering a perpetual balance of trade deficit as discussed earlier.
Interestingly, the liberalisation in 1991 wasn’t forced down the throats of the unsuspecting Indian public.
Instead, the country’s population, educated and otherwise, was groomed through a certain narrative during those early years of the 1990s – a narrative that repeatedly hammered home the message that India’s economy was in dire straits, it had run out of foreign exchange reserves, and it desperately needed to open up to foreign capital to bounce back to life.
If the government continued to regulate businesses; if domestic businesses continued enjoying the benefits of tariffs and other trade barriers; if foreign investments were kept at bay; if getting business licences continued to be difficult; if state-owned businesses were not thrown open to foreign and domestic private companies for buyouts; if consumerism wasn’t given a jump-start – then India’s economy would plunge further. In a nutshell, that was the narrative sold to the public at that time.
So as India was opened up to foreign corporates – leading to a permanent capture of a chunk of the economy – people didn’t mind the historic change they were witnessing.
Instead, a section of the public unsuspectingly welcomed the ‘new order’ as a move that breathed life into what had been branded as an economy in the doldrums.
As foreign countries began showing up in the Indian marketplace, they were celebrated as their blistering ad campaigns on TV and roadside hoardings began to make an impression.
Among the foreign companies that began making inroads following the India’s LPG drive (liberalisation, privitisation, globalisation) were some that were newcomers to the country while many others had already been around – but with lesser clout.
Suzuki had literally shot to fame with its epic tie-up with Maruti Udyog and the Indian government. Honda had become a household name for its partnership with India’s Hero Group. The Hero Honda ads on telly were a rage at that time. Cadbury’s, too, was not just the most popular neighbourhood chocolate after India-based Amul, but it was well-known for its catchy TV ads.
Coca-Cola and Pepsi had swiftly begun making it to the fridges of middle-class Indian households. The cola giants began battling for sponsorship of cricket matches and Indian cricket stars. Coca-Cola’s ‘the official drinks partner’ ads were countered by Pepsi’s ‘nothing official about it’ propaganda series – and the contest was loved by youngsters.
Bata’s shoes were often wrongly seen as the best indigenous footwear in the market, while tech giants IBM and Microsoft began to resonate with the educated masses.
CABLE TV INVASION AND MASS HYPNOSIS
Another interesting mode of ‘grooming’ and ‘shepherding’ the Indian public came about at that time in the form of a cable television boom.
The advent of cable TV in middle-class neighbourhoods suddenly gave people a sort of a window to the world.
Once people started getting the taste of stylised, westernised mass media content on their TV sets – through popular channels such as Star Plus, Star Movies, AXN, Discovery, Cartoon Network, MTV, Prime Sports, ESPN, BBC, CNN – they lapped it up as a refreshing break from what began to be seen as the monotonous and limited offerings of Doordarshan.
The charm, guile and freshness of international TV channels, most of which aired content largely from the western world, cajoled the captive Indian crowd into falling in love with getting ‘integrated’ with the world outside.
With Indians becoming hypnotised consumers of international mass media content from the cable TV explosion in their drawing rooms, it helped the cause of foreign corporate brands to get cheered and welcomed upon their arrival in India.
A key contribution of this ‘internationalisation’ of the content and ads on our television sets was to push the TV-watching Indian crowd further towards a West-influenced consumerist lifestyle.
WHERE HAVE ALL THE JOBS GONE?
There are many influential people and interest groups that had openly championed the Indian government’s decision to open up the country’s economy to LPG (liberalisation, privatisation, globalisation).
From politicians to bureaucrats to stakeholders in business to analysts to mainstream media to international organisations: the most common benefit of the move that they all spoke of was that LPG would jump-start employment. That there would be a huge job generation.
Statistics between 1991 and 2020, however, show that it’s quite the contrary. The unemployment rate in India in 1991 stood at 5.45%.
After economic reforms, instead of going down, unemployment kept creeping upwards for every subsequent year until 1996, when it stood at 5.65%.
Then after falling only marginally for a few of years in between, it continued to rise before hitting 5.73% in 2003.
Over 30 years since economic reforms began, the unemployment rate stood at a worrisome 8% a few months back. So the argument that liberalisation generates jobs is a complete myth, as proven by tell-tale data.
The trend is similar when it comes to the youth unemployment rate – another key indicator of the general health of the economy. The youth unemployment rate stood at 16.6% in 1991, and over the next 28 years, it jumped up to 23.34% in 2019.
Even more alarming is the data on rising income equality. In January 2020, Oxfam published a study that found “India’s richest 1% owns over 4 times the wealth owned by 953 million people who make up for the bottom 70% of the population”.
About three decades after India witnessed economic reforms, this is the sorry state of affairs when it comes to inequality of wealth.
These stats clearly shoot down the theory that opening up the Indian economy led to job generation and an improvement in standard of living.
JARGONS OF GAS AND DECEPTION
Yet another factor that played a crucial role in convincing the public that the 1991 liberalisation was a necessary measure was the crafty use of deceptive terminology.
Just as foreign corporates were making a beeline to enter India, the mass media – either unwittingly or knowingly – began dishing out certain terms and jargons that coaxed the educated class into welcoming the march of foreign capital.
India needs ‘FDI’ or ‘foreign direct investment’ to revive its struggling economy.
‘Privatisation’ is the only way to free up the country from state ownership.
‘Free trade’ is the need of the hour in a world that is getting integrated.
Isolationism is passé and the only way forward for a progressive India is to adopt ‘globalisation’.
‘Liberalisation’ of the economy is the only way to rescue it from excess government control.
These jargons were thrown at the educated masses by mass media outlets to persuade them to accept the unprecedented cracking up of what was a carefully regulated economy.
The term ‘FDI’ served as a cover for a permanent invasion by foreign capital.
‘Privatisation’ was a cosmetic term for a fire-sale of precious state-owned assets.
There was nothing free about ‘free trade’ because it meant big companies from powerful countries could dump their goods in India in exchange for financial wealth transfer.
The term ‘globalisation’ was sold to to the public to make they don’t get suspicious or xenophobic of foreign brands, whose products and services were grossly overpriced.
And the term ‘liberalisation’ helped remove government-controlled measures in place to protect domestic businesses.
In the end, the strategic use of terminology went on to pave the way for the recolonisation of the Indian economy.
The jargons remind us of the 1980s when two similar terms – glasnost (openness) and perestroika (restructuring) – were used as cover for setting the Soviet economy free from state control.
GATT-WTO: SETTING THE AGENDA FOR INDIA’S RECOLONISATION
As the capture of the Indian economy by foreign corporates was underway, the country began to enter the orbit of powerful international institutions, such as GATT (later WTO), IMF and World Bank.
These influential entities started dictating terms to the government, guiding New Delhi towards doing away with trade barriers and handing India hefty loans with strings attached.
GATT, which is the General Agreement on Tariffs and Trade, was a global trade pact inked by the governments of 23 countries in 1947. While it had the look and feel of a responsible monitoring body on international trade practices, its actual task was to take free trade forward.
In 1995, GATT underwent a makeover to become the WTO (World Trade Organization). Four years into liberalisation, India became a prime focus for the WTO as foreign companies fell over each other trying to enter the country’s lucrative marketplace.
The GATT-WTO programme had been geared towards breaking down trade barriers and promoting the principles of free trade – basically helping influential companies from powerful countries to storm into the economies of weaker nations.
Growing monitoring and pressure from GATT-WTO has seen not just India, but a number of similarly financially weak countries slip into impoverishment. It led to a widening of global inequality of wealth.
EVEN OUR THOUGHTS ARE COLONISED
Fast forward to the present: we are seeing yet another level of colonisation of India that has been driven by the advent of technology.
The social media boom, essential as it may seem, is actually a case of modern-day tech giants from America’s famed Silicon Valley colonising the entire digital space of India.
On the face of it, it may seem like Google Chrome, Gmail, Facebook, Messenger, Twitter, WhatsApp, Instagram, YouTube, Microsoft Outlook, LinkedIn and Skype are just handy tools in a world dominated by smartphones.
A closer look will show that these are not merely social media tools but actually privately-owned platforms with the potential to double up as surveillance monitors.
These companies, which have a vice-like grip on the digital space, have monopolistic influence in their respective fields – and they enjoy extensive penetration across the length and breadth of India, giving rise to concepts such as ‘surveillance capitalism’ and ‘thought colonisation’.
Dangerously, our ‘thoughts’ and ‘data’ on our private lives are scripted and held captive in giant servers owned by these social media octopuses in remote parts of the world that we aren’t even aware of.
That information is then assessed, commodified and sold off – without our knowledge. What is even more dangerous is that we don’t feel alarmed by this onset of thought colonialism.
India is the primary market for these so-called social media companies from the western world. Yet, very few Indians are aware of a now-famous tweet from whistleblower Edward Snowden that exposes the real role of social media platforms in our lives.
On March 18, 2018, Snowden had tweeted: “Businesses that make money by collecting and selling detailed records of private lives were once plainly described as surveillance companies. Their rebranding as social media is the most successful deception since the Department of War became the Department of Defence.”
POST-PANDEMIC INDIA: WHO RUNS THE SHOW?
Adding a new layer to the debate on whether India’s recolonisation will continue or freeze is the impact of a global economic calibration due to the coronavirus pandemic.
Foreign companies in India as well as overseas businesses that used to trade with the country have definitely lost much of their steam to carry on conducting business at breakneck pace because of worldwide lockdowns, followed by restrictions.
But the signs aren’t good in the long run.
Recent news reports point out that the Indian government has reached out to more than 1,000 American companies to fill in the vacuum left by Chinese businesses that pulled out of India due to the impact of the pandemic and also because of an escalation of tensions between the two Asian neighbours.
There’s long history of western businesses repeatedly trying to tap into the Indian economy whenever their own countries have faced financial turmoil. Which is why there’s hardly any doubt they will launch the same project once the world shakes off the Covid-19 pandemic.
Already, our economy is in the grip of over 4,000 foreign companies and foreign-controlled companies, alongside countless overseas business that dump goods and services here.
Once the restrictions on global trade are lifted, the existing foreign players and new ones will make a desperate dash to tap into the Indian economy to recover the financial wealth they couldn’t make due to the coronavirus.
Post-pandemic, it will only be a matter of time before the halted engines of India’s economic recolonisation are back in full swing.
DO WE KNOW THE MEANING OF FREEDOM?
The objective of this article is not to incite people into becoming xenophobic and into going ballistic against foreign brands.
It is not a clarion call for marginalised domestic businesses to use force and manipulation to take back control of the marketplace.
Instead, the article intends to call on fellow Indians to realise, acknowledge and accept the bitter truth that this country’s freedom is limited only on the political and administrative fronts. The economy is largely controlled and gamed (not necessarily in a negative way all the time) by foreign stakeholders.
It is possible that this realisation – that we are as deeply colonised as we were during the days of the East of India Company – could motivate domestic businesses and entrepreneurs to win back control of the Indian economy. That indigenous businesses will control the marketplace, and as a result, they will reinvest their earnings back into this country’s economy.
There will be no resource loot or resource drain outwards. The revenues made by domestic businesses will remain at home, they will keep getting reinvested and recycled here itself.
At the heart of this issue lies a basic question: do we really know what freedom means? The fluttering of the flag and the echoes of the anthem – do they signify real freedom?
Not necessarily. At least, not entirely.
A truly free country is one that has an economy free from any kind of external overcontrol or manipulation.
A truly free country is not one that sees foreign players pumping financial resources out of it, precipitating deepening impoverishment.
Going by that metric, freedom is as much out of our reach now as it was during the darkest days of British colonialism.
It was colonialisation back then. It’s recolonisation now. Only timescales have changed. India’s economic miseries have not.
Unless we wake up from this big, bad dream, which means unless we show external players the door and regrow local businesses rooted to our motherland, we’ll keep hitting the wall in our pursuit of why a rich country like India continues to remain poor.