16 March, 2010

What Blocks Global Investment in India

Published in Diplomatic Courier, 12 March 2010


In this causally-connected post Cold War neo-liberal world; any real-estate dilemma in Europe or USA makes the Indian stock indices jittery. Similarly, any socio-political imbroglio in India also curtails the investment capacities of multinational corporations : more so keeping in mind India’s immense potentialities as a ‘consumer market’.

Thus, the apparition of 1967 is haunting India and consequentially the world too.

The then ‘Naxals’ are now being termed as ‘Maoists’. Nomenclature has changed, but the essence of the problem remains. The genesis of the armed resistance in 1967 was in the hamlet of ‘Naxalbari’ in the eastern province of West Bengal. At that juncture, the movement was temporarily curbed by the ‘state apparatus’.

Any insurgency sustains itself by feeding on the population and the Maoists are doing it no differently. The ‘protracted people’s war’ which was thought to have fizzled out in the early 1970s raised its serpentine head in 2004. Since then, the Maoists have ‘upped the ante’ and extended their dominions to penetrate large swathes of the Indian landmass. Presently, about one-third of the districts (substantially rural) in India are under the ‘Maoist Influence’. The area basically stretches from the Indo-Nepal border in the north to the southern part of the subcontinent; cutting across several provinces in its trajectory.

The Maoists staunchly oppose any form of market liberalization and global integration of goods and services. They view globalization as a powerful vehicle that assaults ‘tribal culture’ and threatens their ‘socio-economic existence’. They strictly disbelieve in the ‘trickle-down theory’ adopted by a welfare state.

Hence, they are opposed to mega projects by transnational corporations. About US $3 bn Foreign Direct Investment (FDI) being poured in by global steel giants like ArcelorMittal (Luxembourg based) and Posco (of South Korea) is hanging in balance due to the hurdles in acquiring spaces in the rural hinterlands. An attempt of the ‘Indonesian-based Salim Group’ to set up a chemical hub in a Special Economic Zone (SEZ) in West Bengal was thwarted in 2007. On the other hand, Indian giants like the Tatas and the Vedanta group are facing strong opposition by the Naxal-backed tribals while making inroads into the rural backyards.

The strong propaganda machinery as well as the armed militia of the Maoists deters the growth of infrastructure and ‘first world development’ in the rural zones of the subcontinent. Though they speak volumes for ‘lack of development’ of the Indian peasantry, but ironically tend to impede ‘growth’ in the long run citing ideological rationale.

India is in definite need of FDI along with the concomitant infrastructure. In 2009, total FDI inflow into India as per the estimates of Ministry of Commerce and Industry amounted to US $19.9 bn (till August). China, on the other hand mustered an FDI four times compared to India in the same period.

The contribution of the manufacturing sector towards overall Gross Domestic Product (GDP) in India is hovering around 28 per cent for the last seven to eight years. And with the declining contribution of the decrepit agricultural sector (about 17 per cent in 2007-08), India needs to boost its secondary sector so as to climb up the ladder of industrialization. In that venture, FDI is imperative. In this scenario, the Maoist insurgency is a serious impediment and the authorities have to act in a positive definite manner to boost India’s image as an ‘investor friendly’ nation.

Data from the Ministry of Home Affairs clearly show a gradual rise of the number of casualties due to Maoist insurgency since 2004. The ‘liberated zones’ established by the insurgents in the Indian interiors pose dual problems of security and underdevelopment.

Manmohan Singh has been the ‘poster boy’ of the LPG (Liberalization, Privatization and Globalization) policy of the United Progressive Alliance (UPA) government. In fact, he was the votary of ‘opening up India’ since 1991. Thus it is not only the Indian state that is confronting a major challenge but Dr. Singh’s credentials as a suave economist is also at stake. Returning back to power in May 2009, the UPA coalition had a formidable task to deal with; and that was to tackle the Left Wing Extremism which had emerged according to Singh, as the ‘biggest internal security threat’.

Hence, the much hyped “Operation Green Hunt” was launched in the Dantewada district of the Central Indian state of Chattisgarh in September 2009 to flush out the rebels. In the face of vehement criticism by large sections of civil society against this military offensive, the Home Ministry has probably put a halt on the operation.

Alarmingly, though the ultras prima facie despise globalization and liberalization, they are going ahead in forging a pan-South Asia network of terror. There are reports of a covert alliance of the ‘almost decimated’ Liberation Tigers of Tamil Eelam (LTTE) and the Maoists of India. Actually the sagging LTTE may want to bolster their structure through a fresh base in South India, close to the Lankan landmass whereas the Maoists would seek to cash in on their ‘land warfare expertise’. Also, the knowledge of the LTTE about the global arms racket can be a viable option for the Indian Maoists.

Any further ‘alliance of sorts’ of this combo with the Pakistani based jihadi groups would prove ominous to both India and the US as the Taliban and Al Qaeda would then find sanctuaries in India.

Already, it is established that the Nepalese Maoists have close strategic and military links with their counterparts in India.

Recently, the Home Secretary G K Pillai has suggested that ‘small arms and ammunitions’ from China are being smuggled into India to feed the Maoist rebels. This opens up a completely new dimension of the quandary. The disturbed ‘political climate’ between India and China might suffer another blow from this angle with Dalai Lama’s visit to Tawang in Arunachal Pradesh already generating controversy.

The solutions to this imbroglio are non-linear. Analysts and experts have opined that the Indian government needs to have ‘unconditional’ talk with the Maoists. Honest efforts have to be made on the part of the mainstream to bring the tribals within the ‘social pale’. The huge tracts of land housing mineral resources need to be holistically dealt with. The government can broker a deal between the tribals and the Transnational Enterprises (TNEs), with a ‘win-win’ situation for both. On an encourage note, India has seen instances of ‘Contract Farming’ ventures by TNEs with PepsiCo successfully entering into one.

The Indian nation-state cannot veer away from the ‘development paradigm’ of interconnectedness with the global economy that it had embarked post Cold War. Similarly, the Leftist rebels have to appreciate the inevitability of integration of the tribals with their urban counterparts. India is on the track of globalization and their cannot exist ‘undeveloped islands’ within its topography. If the sub-continent has to grow in double-digits and the world has to benefit from its growth both as a consumer market and a knowledge powerhouse, then the ‘Maoist Menace’ needs to be sorted out. And if the rebels are loath to accept new ideas and want to stick to the age-old moorings, then it would be construed as an anachronism.

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