Ratna and Nadim Siraj
Economic drain: The unspoken truth
August 15, 2023: As India joyfully celebrates its 77th Independence Day today, let us take a thoughtful step back and look at the country from a wider perspective to understand whether Indians are genuinely independent. To figure it out, one first needs to understand the real meaning of national independence.
Well, national independence has never been and can never be a binary scenario where you can straightaway conclude that a country is fully independent. Essentially, there are two kinds of independence a nation can experience – political independence and economic independence.
Political independence or political-diplomatic independence is the kind of freedom that allows the citizens of a country to elect their own political leaders. In a politically independent nation, the judiciary, the army, the police, the administrative class, the technocrats, the diplomats, and the influential domestic businesses are all represented by that country’s own citizens, not foreign nationals.
But crucially, in a politically independent nation, the economy – which is the heart and heartbeat of any country – lies beyond the control of the citizens. Instead, the domestic economy is controlled, influenced, or manipulated by foreign forces. Therefore, a politically independent nation is not free from foreign control as overseas powers control the economy and inflict an economic drain.
Economic independence, on the other hand, is the kind of freedom that gives a country’s citizens full-spectrum independence, ranging from complete say in local politics to complete control over the domestic economy. An economically independent nation is politically free as well as economically free. No foreign corporate powers intervene in any affairs of that country, be it in the economy or otherwise.
Silent, unreported economic drain
So, 76 years since breaking free from rogue British invaders who devastated the Indian subcontinent for two centuries, where does India stand today? What kind of independence do Indians experience? Has this nation tasted full-fledged economic freedom, or are Indians only politically independent?
The bitter truth that the mainstream media, schools and colleges, intelligentsia, historians, activist groups, experts, and people in power never tell the Indian public is that this country of 1.42 billion people is independent only on the political-diplomatic front. For about the last three decades in its 76-year journey as a nation, India actually hasn’t seen or tasted full-fledged independence or economic independence.
Incredible and conspiratorial as it may sound, the truth is that the country’s economy is now largely in the hands of foreign corporate forces that are headquartered in faraway countries. These foreign corporate players, or ‘modern-day empires’, are a gigantic fleet of foreign-headquartered MNCs and conglomerates. The international corporations have been dominating the country’s economic landscape irrespective of whichever political party has been in power over the last three decades.
These overseas players have offices and operations right inside India, and collectively mint a phenomenal amount of money by doing business in this country. Crucially, these foreign corporate powers suck a majority of those earnings out of India and inject them directly into the economies of their native countries. In a nutshell, it is an enormous and unreported economic drain.
The secret leak: Repatriation of profits
As a result of this perpetual economic drain of India’s finances by foreign corporations through what is technically called repatriation of profits, the country is in a perpetual state of increasing poverty and decline. And as a result of India’s financial wealth getting pumped into the economies of the countries where the foreign corporations come from, their native countries are in a perpetual state of increasing prosperity and growth.
As we mark India’s 77th Independence Day today, this article digs deep into the nuts and bolts of this unspoken financial wealth transfer or economic drain from India to abroad, the modus operandi of these modern-day empires, and why the Indian public is never told about this spectacular yet undocumented neocolonialism project.
In the world of geopolitics, there’s a term called ‘Great Game’, which refers to the historical race between the British and the Russian empires back in the 19th century to colonise Central Asia. Today, a similar race is underway – it’s a silent race among 3,200-plus foreign companies and 14,100-plus foreign subsidiary companies to recolonise India’s vast marketplace. This ongoing race can aptly be called ‘Great Game 2.0’. It is a neocolonialism project that is taking place on an unprecedented scale, and at an unprecedented speed.
Shocking numbers, then and now
Schoolbooks and historians routinely remind us of how the British East India Company and later the British monarchy colonised the Indian subcontinent once upon a time and squeezed the peninsular region dry during a 190-year-long imperial-style rule from 1757 to 1947. In 2018, an economic investigation conducted by Indian economist Utsa Patnaik revealed that British invaders, comprising the East India Company and later the UK-based monarchy, stole about $45 trillion from the people of the Indian subcontinent between 1765 and 1938.
However, you will not find any prominent economist, journalist, politician, government body, academician, commentator, or NGO turning the spotlight towards the ongoing recolonisation of the Indian economy by foreign corporate giants. There are a few activists and researchers who are trying to educate the public about the ongoing economic drain project, but their voices can only be heard on the fringes of India’s mainstream discussions and debates.
A look at the numbers will give you a clear picture of how deeply the Indian economy is currently colonised by foreign corporate forces.
Back during the official British colonial era, the Britishers used to siphon financial resources out of the Indian subcontinent that was equivalent of 8% of the GDP. Fast forward to a couple of years ago, according to independent research, foreign corporate players collectively transfer financial resources out of the country that is equivalent to 17% of the GDP. Basically, the Indian economy is now at least twice more colonised than it was during the British era.
Colonialism, then and now
Back during the time when European pirates illegally colonised the Indian subcontinent, seven foreign companies conducted business with the subcontinent and took home the earnings they made here. They were the British East India Company, French East India Company, Portuguese East India Company, Dutch East India Company, Danish East India Company, Swedish East India Company, and Austrian East India Company. They routinely squabbled with one another, but their mission was the same – to make profits here and take it home.
Compare that to today, instead of seven foreign companies, there are a mindboggling 3,291 foreign companies that are actively operating in India, along with 14,137 active foreign subsidiaries. A vast majority of these foreign MNCs or modern-day empires descended upon Indian soil during the last 30 years, after the Indian government inexplicably opened the doors of the country’s economy during the early 1990s for foreign corporate players to come and exploit. That exploitation of the Indian economy or the economic drain is underway right now, and is showing no signs of slowing down in the immediate future.
And where do these thousands of hawkish, India-focused overseas companies come from? Data from the corporate affairs ministry shows that most of these companies are headquartered in the United States, followed by Singapore, Britain, China, Japan, Russia, Germany, Hong Kong, France, South Korea, Switzerland, Netherlands, Canada, UAE, Australia, Spain, Malaysia, Taiwan, and a few other countries and territories.
What are the forms and shapes in which these foreign companies operate in India, and how do they transfer their winnings out of the country? Some of them go about their business on Indian soil directly as parent companies, using liaison offices and project offices. Some of them operate here through branch offices, while some others are present here through wholly owned subsidiary companies.
The official presence apart, there are numerous influential foreign companies that do business in India using shell companies as cover. It means, these companies informally and covertly operate in the country behind the cover of domestic companies, hiding their presence in the Indian marketplace.
Apart from using shell companies to covertly do business in India, many foreign companies and foreign financial investors also use domestic shareholders and domestic investors as cover stakeholders in Indian businesses in many instances.
As a result, it becomes virtually impossible to track their presence and operations in the country, which is the whole purpose of going covert. The system is designed that way. That’s how silent neocolonialism works – it’s insulated. The economic drain isn’t easy to bust.
What happens to all the money?
All these companies suck out the earnings they make from their operations in India by various means, such as through dividends or profits, the buyback of shares, the reduction of share capital, fees for technical services, consultancy services, business support services, and royalties. In the process, the foreign companies are made to negotiate with multiple regulatory bodies, such as the Companies Act, Foreign Exchange Management Act, tax regulations, double tax avoidance agreements, and transfer pricing rules.
It is worth noting that these thousands of companies don’t necessarily work together as part of a larger well-oiled cabal trying to recolonise India’s economy. Some of them do coordinate and cooperate as they conduct business here, peacefully carving up the country’s economic landscape into well-marked jurisdictions and zones. It’s quite like the territorial markings that wild animals do to establish their zones. And then, there are many other foreign companies that are in a constant state of business war and territorial tussle with each other in a cut-throat fight for expanding their share of the Indian marketplace.
Interestingly, while we are never directly told that such a major economic drain project is underway, we are allowed to discuss and debate in isolation the collateral impact of the operation. Such as rising inflation, deepening poverty, increasing job losses and unemployment rate, alarming rural distress, currency depreciation, and perpetual finance crunch at the administrative level. We Indians do culture on these economic ailments from time to time, but we fail to connect the dots. We don’t realise that they are collective a fallout of the recolonisation of the country’s economy.
Role of mainstream media
Unfortunately for dedicated followers and fanatics of mainstream news, India’s popular press doesn’t make any effort to blow the whistle on the economic drain. Instead, the mainstream media helps those behind the foreign neocolonialism project by keeping the Indian public distracted with shallow and irrelevant news.
They report the fallout of this ongoing neocolonialism as naïve, unconnected events. Hence, people are unable to see the larger picture. Why does the mainstream media play this negative role? It’s because they are on their side, not on the public’s side. All the prominent mainstream media outlets survive on the money they get from the colonising foreign corporate players in the form of advertisements, advertorials, tie-ups, endowments, and ownership of stakes.
If the press survives on ad money from foreign corporations, on ad money from foreign-supported political parties, and on financial support from foreign NGOs, will journalists be in a position to independently open their mouths about the recapture of our economy? No way.
The point is, the dark days of the British East India Company and the subsequent British Raj are here again. The East India Company left us long back, soon after the uprising of 1857. The British monarchy also left us after 1950, but the old times are back. Modern-day ‘East India Companies’ now have their boots on the ground. Yet again. Colonialism didn’t go away for good. It has come back as neocolonialism.
It was a case of overt colonisation back then. What is unfolding now is covert recolonisation. Only the pages of the calendar and colonialists’ modus operandi have changed.
One mission, two routes
The modus operandi of the modern-day empires targeting India’s vast financial resources comprises two distinct lines of action. One, these companies are soaking money out of India through the WTO-approved practice of international trade.
The WTO or the World Trade Organisation is the international body that these powerful companies themselves lobbied to set up in order to give legitimacy to their various neocolonialism projects of dumping nonessential goods and services in brand-fanatic countries around the world in exchange for massive profits. So, international trade is one prominent way in which the foreign companies are transferring money out of India. Here’s a detailed report on this subject from Empire Diaries.
The other way in which India is leaking huge quantities of money and suffering this unprecedented economic drain is through the practice of FDI or foreign direct investment. Under this system, the foreign companies have been investing heavily in India’s economy by bringing in their own money as well as by investing loans drawn locally from Indian banks.
After the initial phase, once their businesses started succeeding, they started transferring their earnings or profits straight to their home countries. The money first usually goes into the banks of their home countries. Those banks then reinvest that money into their local economies, subsequently helping the countries prosper, develop, and become economically sound.
As a net effect of this economic drain or financial wealth transfer out of India due to this neocolonialism project, the home countries of the foreign corporate forces are getting richer and richer by the day, while they are constantly offloading their poverty right into India. It’s not rocket science. It’s simple economics.
Why else do you think the G7 countries, along with China, South Korea, and a handful of European nations are so opulent? It’s only because modern-day empires from those countries are soaking up immense volumes of money from India, Pakistan, Nepal, Sri Lanka, Bangladesh, the African countries, and parts of South America and Southeast Asia.
The foreign corporate players behind this enormous economic drain operation to wring India’s economy dry are names that you know very well. They are conglomerates, companies, and trusts whose brands are household names across India because of their immense popularity, thanks to the power of glossy and catchy year-round advertising.
The idea here is not to name and shame the new ‘East India Companies’ or to whip up xenophobia against foreign cultures, foreign brands, and foreign individuals. Empire Diaries is firmly against xenophobia and believes in the need to exchange cultures and ideas across borders. The point is, we believe in wholeheartedly supporting local and decentralised businesses over nonessential foreign brands. Why rely on foreign companies, and why make foreign countries rich if we can jolly well buy what we want from our own homegrown businesses?
The focus of this article is to give you a clear picture that a silent economic drain of the Indian economy is underway, and that nobody is paying attention or raising alarm about this intensifying neocolonialism mission. The focus here is to educate fellow Indians that the country will become poorer and poorer if this gigantic wealth transfer is allowed to continue freely.
Today, look at any industry, and you will find that foreign corporate players are running the show. In some sectors of the Indian economy, the foreign players have moderate influence, such as milk distribution, tobacco, and budget hotels. But in many other areas, they call the shots, dictating terms to the vast Indian consumer base.
Full-spectrum neocolonialism
Fast food chains, retail outlets, sports goods, smartphones, social media platforms, digital entertainment, internet services, fashionwear and textiles, cold drinks, banks, publishing companies, electronic gadgets, hospitals and medicines, cars, insurance, toys, confectionery, passenger aircraft, fighter jets, arms and ammunition, household essentials – Indian companies are losing out to foreign forces in all of these sectors.
What has been the biggest success of these modern-day empires? By smartly using their influence and charm, and the power of perpetual advertising, they managed to turn millions of Indians into devoted customers and dedicated employees who have internalised their fondness for anything and everything that’s foreign, irrespective of whether they are essential.
You might wonder, what’s wrong if foreign companies are doing business in India? Aren’t they generating jobs? Aren’t they bringing in investments? Aren’t they paying taxes and giving the Indian public new things to buy and experience? Aren’t they making our shopping malls hot and happening? Are we wrongfully questioning their presence on Indian soil? Are we too harsh to call their actions neocolonialism?
The bottom line is, their positive contribution to Indian society and the Indian economy is essentially superficial. It is outweighed by the overall deep negative impact of the financial wealth transfer they are carrying out. It’s like CSR events of rogue companies, or well-advertised charity done by billionaires who dodge taxes. The math is plain and simple. The minuses dwarf the pluses. The net result is a constant economic drain. And the mainstream press tells you only about the pluses of the foreign companies’ contribution to India.
To understand what is precisely going on in this economic drain project, let’s use the example of an American cold-drink company operating in India. The example case study can be multiplied a few thousand times over to get a sense of how we are financially bleeding due to the overall impact of this economic recolonisation.
Soft drink mathematics
Now, let’s assume the American soft drink giant in question is an immensely popular consumer good all over India, especially among youngsters, sports junkies and foodies, right from the urban space to far-flung suburbs and villages. For every bottle of soft drink that the foreign company produces in Bharat and sells here, it makes a certain profit.
Out of that profit earned per bottle, one part goes to the Indian government’s coffers as taxes. Another part is reinvested by the foreign company into its operations in India to expand its business. And the third part of the profit (presumably the largest part) is dispatched straight to the home country of the soft drink company where it is headquartered.
So, a big chunk of the money the foreign fizzy drink brand makes in India is sent all the way to a foreign country, the company’s home turf. Technically, the money travels from here to foreign banks, while some of it presumably also gets parked in tax havens around the world.
Now multiply that take-home profit from that one bottle by the lakhs and lakhs of bottles that the foreign company sells in India each hour, each day, each week, each month, and each year. The final sum of the profits that it transfers to its home country – partly to foreign banks and partly to overseas tax havens – runs into millions of dollars annually.
It’s crucial to understand that India’s economic drain is being carried out through this repatriation of profits. Basically, India is ending up leaking its financial wealth like a sieve simply because millions of Indians casually agreed, or got persuaded by flashy ads, to consume the nonessential beverage regularly, and pay for them. That perpetual transfer or outflow of money from the hands of Indian consumers to the coffers of the American soft drink giant happens on a mass scale, forcing India’s economy to lose its financial wealth. That trend, in turn, invites escalating poverty.
Wealth transfer, poverty transfer
Well, because there’s a neat transfer of wealth from India to a foreign country, there’s also a resultant transfer of the same degree of poverty from the recipient country straight into India. Wealth moves from here to there, and poverty gets transferred from there to here. So, as the money flows out, the recipient country gets richer, and the targeted country gets poorer. It is economic drain through classical neocolonialism.
As discussed earlier, the outward wealth transfer by foreign companies is not the only way in which India is constantly leaking money. There’s another way in which moolah flows from here to the banks and economies of foreign countries. It’s through the import of nonessential goods from abroad via international trade. Essentially, India imports much more from other countries than it exports to them, resulting in an overall outward drain of the country’s financial resources.
In November 2022, India’s trade balance ran an embarrassing deficit of $23.9 billion, which means our overall imports overshot our overall exports by a massive margin. Between January 1957 and November 2022, India’s average trade balance stood at a deficit of $401 million.
Dependency theory
There’s an interesting theory that explains India’s economic drain well. It’s called the dependency theory, which explores the root cause of why countries such as India perpetually suffer from trade deficit and finance drain. The dependency theory has its beginnings in two papers that were written in 1949. They were authored by Hans Singer, a German-born economist from the UK, and Raul Prebisch, an economist from Argentina.
According to the theory, some countries remain financially troubled because vital resources always flow from the margins of human civilisation, which are poorer and weaker nations, to the core of human civilisation, which are affluent and powerful countries.
The dependency theory says that this imbalance caused by powerful countries dominating less influential countries and siphoning their money becomes possible primarily because the two contrasting parties are deeply integrated into a common global system. As a result of this integration or connectedness, weak countries are unable to break free from the influence or orbit of powerful countries, which then exploit them financially through economic tools such as trade, FDI, and international groupings.
This Singer-Prebisch theory, as it is also called, helps us understand why India continues to remain so poor – mainly because our economy is too deeply integrated with a rigged world system in which the terms of trade and international law are heavily tilted in favour of powerful countries that call themselves developed nations.
When India was prosperous
Let’s turn the clock back by about 1,000 years to the time when the Indian landmass was not colonised by foreign players. In the year 1000 CE (1000 AD), several kingdoms or empires were simultaneously running the Indian subcontinent, having carved out their own respective jurisdictions.
It is estimated that for a 1,000-year period from around 1 CE (1 AD) to around 1000 CE (1000 AD), the economy of the Indian subcontinent was arguably the largest on the planet. In 1000 CE (1000 AD), the Indian peninsular region’s estimated share of the global GDP was as high as 28.9%, which is an incredible figure by today’s standards. Data estimates show that this region was the most prosperous place on Earth at that time.
Seven centuries later, when the Mughals were in power during the year 1700, the Mughal empire and the Chinese empire of that time were jointly the two biggest economies in the world – each empire or region boasting an impressive 25% share of the global GDP.
However, the Indian subcontinent’s phenomenal prosperity began to drastically diminish when invaders from Europe came here. The biggest dent to the subcontinent’s economy was dealt first by the rogue British East India Company’s 100-year colonial spell from 1757 to 1857; and then by the hawkish British monarchy’s 90-year misrule from 1857 to 1947.
By the time India eventually gained political freedom from British invaders in 1947, its share of the global GDP stood at a pathetic 3% – a clear outcome of European colonisation. Right now, India’s share of the global GDP is hovering just over 3% – which is far, far below the bright days of the past. In simple words, India has today been reduced to a giant marketplace and labour market. From the standpoint of opportunist foreign countries, this land is a dustbowl teeming with hordes of consumers and plenty of cheap labourers.
Economic drain and a trail of destruction
In this context of the economic drain, let’s look back at the gigantic shock treatment that Indians received about 30 years ago. We’re talking about the liberalisation, privatisation and globalisation of the Indian economy that was kick-started in the early 1990s. Data shows that the unemployment rate in India in 1991 was 5.45%, but 22 years after the much-celebrated economic reforms, joblessness jumped up to 8.5%. The trend has been equally dismal for youth unemployment as well. The youth unemployment rate was 16.6% in 1991. In the next 28 years, it shot up to 23.34% in 2019.
The data on India’s rising income equality is also alarming. In January 2020, Oxfam published a disturbing study. It concluded: “India’s richest 1% owns over four times the wealth owned by 953 million people who make up for the bottom 70% of the population.”
These tell-tale numbers prove that the celebrated entry of foreign corporate players into the Indian marketplace has decisively not resulted in more jobs, and has neither improved the Indian public’s overall financial condition. Instead, it has denuded the Indian economic landscape by scraping out financial resources. Only a small section of the Indian population prospered since foreign corporations entered India, while the large majority of people have not benefited from it.
The writing was on the wall. If a country decides to allow foreign forces to pump money out of the economy, the result is a foregone conclusion. It’s the same story across the economically colonised world – the Indian subcontinent, Southeast Asia, Africa, and South America.
The narrative war
A major factor that played a crucial role in misleading the unsuspecting Indian public into welcoming the onrush of foreign corporate players was the crafty use of deceptive terminology. It is another characteristic of economic drain through neocolonialism. Just as foreign corporations were making a beeline to enter India, the mass media – some unwittingly and some knowingly – began to dish out certain strategic terms through their headlines and daily news coverage.
The term ‘FDI’ serves as a naïve cover for what is actually an economic invasion by foreign forces using foreign capital. ‘Privatisation’ is a cosmetic term for the fire sale of state-owned assets. There is nothing free about ‘free trade’ because it actually means big companies from powerful countries can dump their nonessential goods in India in exchange for big bucks (remember the dependency theory we discussed earlier on?).
There’s more. The term ‘globalisation’ is tactically sold to the public to make them fall in love with foreign brands rolled out by giant MNCs, whose products and services are grossly overpriced, over-advertised, and often nonessential. And the term ‘liberalisation’ helps remove government-led measures in place to protect frail domestic businesses from being swept aside by robust, invasive foreign monopolies.
This brand of silent economic drain of the Indian economy over the past several decades has come a long, long way. It actually began with the birth of the World Bank, the IMF, and the GATT, which later became the WTO. Fast forward to the present. We are seeing yet another level of the recolonisation of India driven by the so-called internet revolution and technological advancement.
The explosion of the internet, the invasion of smartphones, the social media boom, and the sharp rise in app-based services are collectively a case of modern-day tech empires, mostly from California’s Silicon Valley, capturing India’s digital landscape. If you take a step back and look at India’s internet ecosystem, you will realise that foreign tech giants literally own the online space. From social media apps to internet browsers to video-sharing sites to OTT platforms to ecommerce services to smart devices – Indians are deeply and excessively dependent on tech empires from California.
Great Game 2.0: Will India survive?
Companies, corporations, MNCs, transnational companies, conglomerates, enterprises, trusts, venture capitalists, angel investors, seed funders, endowments, startup funding platforms, philanthro-capitalist networks, etc. – by whatever name you call them, they are the modern-day ‘East India Companies’. And yet again, it’s India that is in their crosshairs as part of their neocolonialism mission to make money.
There’s an old saying – desperate situations need desperate measures. For Indians, nationalistic occasions such as Independence Day on August 15 and Republic Day on January 26 remind us that we are indeed capable of setting our economy free from foreign control, and therefore, plug the economic drain.
If our freedom fighters could do it valiantly in the past, the same effort can be replicated now or in the days to come. And to achieve it, we don’t need guns, bullets, armies, violence, extraordinary infrastructure, and xenophobic measures against foreign cultures. All we need to do is to simply wake up and reset our mindset.
First of all, we need to sweep aside our obsession with politics, and wake up to the ongoing economic recolonisation of our economy. We first need to know that we don’t know. Next, we need to make a collective decision to start helping thousands and thousands of local businesses stand up on their feet. If we start prioritising the products and services offered by domestic companies, then they can steadily begin to outperform their foreign rivals operating on Indian soil.
Such a constructive, peaceful, and economically sensible swadeshi movement will ensure that the reins of India’s economy will return to the hands of domestic businesses – big, medium, and small. If domestic businesses start flourishing, they will have a tendency to reinvest most of their profits back into the Indian economy – as opposed to the current case of foreign companies transferring most of their profits from the Indian economy to their native economies.
The resultant pause in the outward drain of India’s financial resources will directly lead to authentic economic self-sufficiency, growth, and development across the country, accompanied by rising prosperity across income groups. This idea isn’t a fairytale or myth. That’s precisely how the Indian subcontinent actually was about 1,000 years ago before European pirates arrived. And that’s precisely how the world’s richest dozen countries are right now.
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We must not forget the local collaborators of the East India Co. Surprisingly, all the
EIC collaborators are most celebrated business houses of “independent” India.