A recent issue of “Business Week” ran with the rather provocative headline “How risky is India?”. [Business Week]
India losing its lusture for investors?
img: via Business Week
Whenever a bomb blast or any kind of terrorist attacks occurs, the normal reaction of Indians and people of Indian origin the world over is that of shock. This shock is soon replaced by indignation – at the terrorist, at neighbor nations, at the politicians, at the bureaucracy, and anything and everything under the sun. Soon this is followed by another emotion called “moving on” where people shrug their shoulders in sheer helplessness and settle back into life. People in India flock to the theaters for their latest Bollywood or regional flicks [ET]. Here in US, we get together for potluck dinners. Point is, Indians in India and abroad move on. It comes naturally to us. However, being a part of a global economy, some of the scars and/or misgivings stay on with the people who have vested business interests in India. Things have appeared to come to a head with the recent 60 hour Mumbai attacks with the media and investors openly questioning the wisdom of investing in India.
And why not? India has hardly been the poster child of stability and safety in recent years.
India’s fragility is revealed by a pattern of diffused violence—a bomb here, a killing there—that goes unnoticed even in India. Most outsiders (and most investors) don’t realize how dangerous a place India can be. Since 1993, when 13 bomb blasts in one day killed 257 in Mumbai, just over 29,000 people have died in terrorist attacks, including insurgencies in Kashmir and the Northeast, according to a BusinessWeek analysis of data from the Home Affairs Ministry. Thousands more have died in anti-Muslim riots. At least another 4,500 have perished since 2002 in a Maoist rebellion that simmers, and sometimes boils over, in the mineral-rich region of Chattisgarh, where foreign companies plan to invest heavily.
India, of course, has a huge upside that attracts investors and has probably kept them from fleeing.
It’s quite a contrast to the strengths India has used to attract global capital. Engineers and programmers are first class. Skilled, dedicated workers toil for wages much lower than in the West. The nation’s blend of entrepreneurial spirit and democratic values has challenged the more rigid China model. A top-notch executive class boasts chief executives like Ratan Tata, chairman of the Tata Group and innovator in categories from autos to hotels.
Unfortunately, even foreign executive and workers are not immune to the violence in India. A few months back, we covered the story of the CEO of an Italian company near New Delhi, who was beated to death by an angry mob of laid off employees and the Union Labour Minister Oscar Fernandes made an official statement that basically amounted to blaming the actions of the dead executive [UD]. I’m sure that went down well with future investors in that part of the country. In the north eastern states, foreign executives are routinely kidnapped for ransom [DNA India].
There are literally two theories at play here, in tandem. The “broken window theory” which suggests that minor incidents of crime left unchecked will promote further incidents, needs no explanation, with the previous information presented. The second theory is probably the more relevant one in this context – the image of Brand India seems to have reached a “tipping point“, and not in a positive sense.
So what do our readers think? Is the Business Week article questioning India’s stability as an economic power justified or are they over reacting?
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