Jag Venugopal's Blog

March 17, 2012

India is top international investor in UK three years running

Filed under: India — Jag @ 4:07 pm

According to Pranab Mukherji, Indian finance minister, India has been the top international investor in the UK for three years in a row.

I am sure Mr. Mukherji is thrilled at the apparent reversal of roles between formal colonial master and underling. Doubtless many Indians are delighted for the same reason.

But, let’s think for a moment here. India is a land of significant wants — poor roads, electricity, water, drainage and education. Countless numbers of people are unemployed and under-employed. Could our capital not be put to use in India? With so much pent-up demand for the necessities of civilization, could the money not have been put to use within one’s own country?

The flight of capital, sadly, is commentary that Indian investors see better opportunities to make money in the UK than they do in India. With all the political capriciousness, lawlessness (e.g. the Maruti strike), and such, one cannot blame someone for wanting to invest money where the investment is (a) safe, and (b) will earn some predictable return.

As but one example of why investors would feel unsafe in India, consider Vodafone’s example. Vodafone bought a controlling stake in a wireless company in India from a Hong-Kong based company. This was accomplished through the transfer of an offshore holding company. The Indian government slapped a huge tax on the transaction, claiming that the underlying asset being transferred was in India, and thus subject to taxation under Indian laws. Vodafone fought its way to the Supreme Court of India, where it won its case, fair and square (in front of Indian justices, I might add). What does the Indian government do? It proposes to change the law with retroactive effect. Whoever said there was no time travel just has to meet Mr. Mukherji. Move over Stephen Hawking, the next scientific genius is our very own Pranabda.

Let us not be proud of India’s investments in its former colonial master. Rather, it is sad, perhaps even shameful that India herself did not provide stable and safe opportunities for the money to be put to good use.

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