The Financial Times journalist Victor Mallet, writing from New Delhi, reports that India’s Prime Minister Narendra Modi is yielding ground as opposition politicians describe him as “anti-poor” and “pro-business”.
Indian industrialists are said to complain that they find it hard to buy land for their factories and government ministers are reported to be in favour of passing a bill that would simplify the process for acquiring land for factories and roads and dilute a provision in the previous law requiring 70-80% of landowners to agree to a sale.
Opponents who have a substantial majority in the upper house of parliament, are resisting the changes. Political opponents of the BJP are alleged to have mobilised farmers for protests. Sonia Gandhi, the Congress leader, led a protest march in New Delhi against the government’s “anti-farmer” bill.
Gurcharan Das, who formerly headed Procter & Gamble in India, complained: “What is essentially an attempt by the Modi government to cut red tape has become politicised as a farmer versus industry issue. It’s ‘good farmer’ versus ‘bad industry’.”
Ten months into the administration of Narendra Modi, foreign investors are annoyed by the failure to repeal a retroactive tax law which allowed the reopening of closed cases, overturning a victory for Vodafone in the Supreme Court and leading to a tax demand against the UK’s Cairn energy, IBM, Nokia and Mitsubishi.
Foreign direct investment is though to be desirable, especially in banking, railways, insurance and retail. A proposal which allows 100% FDI in railway infrastructure, creating networks and supplying bullet trains, will – prudently – not allow foreign firms to operate trains.
A bill to raise the foreign investment ceiling in private insurance companies from 26% to 49%, wisely provides that the control and management of the companies must remain with Indians.
Britain’s experience of unrestricted FDI has led to poorer but more expensive health, transport, water and electricity services. Its growing reliance on food imports as those producing perishables (especially milk) are offered prices below production costs and leaving the land.
Does India really need foreign investment? Should it cover its fertile areas with concrete?