A series of policy announcement have been made over the past few weeks as part of stepping up the implementation of the program of globalization through liberalization and privatization. The doors of the country have been opened wider to foreign capital to loot the labour and resources of the country. At the same time, Indian capitalists are being enabled to make more profit. Indian capitalists are happy to have more opportunities to share the loot along with foreign capital.
On 10th November, the NDA government announced major relaxations for Foreign Direct Investment (FDI) in 15 sectors, including defence, civil aviation, broadcasting, construction, banking, and plantation. (see Box for details)
Just the previous day, on 9th November, Indian Railways awarded two contracts to General Electric Company of America and Alstom Company of France to set up diesel and electric locomotives factories, respectively, in Bihar. The estimated cost of the projects is about Rs 40,000 crores over 10 years. These two contracts have been signed as per the decision of the Union government to allow 100% FDI in railways infrastructure.
The BJP-led NDA government is going all out to make it easy for Indian and foreign capitalists to maximize their profit in the country. It has declared that it will significantly reduce approvals that are required and eliminate existing restrictions so that new businesses can be set and existing ones wound up as quickly as possible, in the interest of capital. This year for the first time, the World Bank and the Department of Industrial Policy and Promotion have ranked India and its states on ‘ease of doing business.’ India ranked 130 out of 189 countries in the index released last month. The government has declared its intention to considerably improve India’s rank for ‘ease of doing business’ by next year. (see Box)
The ranking of states within India has also been done to provoke competition amongst different states to create most favourable conditions for capitalists to make maximum profits. The competition in changing labour laws in favour of capitalists has been led by Rajasthan. Land acquisition has been made easier by Tamil Nadu.
Handing over public assets to private hands for very little compensation has been the course of privatisation followed by successive governments. On November18, the government approved sale of further 10% government shares in Coal India of the value about Rs 21,000 crore and the sale of shares of Cochin Shipyard.
Justification for liberalisation and privatisation
The government says that it is not handing over control of strategic sectors to foreign capitalists and multi-nationals as it is permitting them to own only 49%. This is misleading the people as with 49% ownership, the foreign capitalist has the largest share of ownership in most companies since the rest of the shares are distributed between Indian banks and/or insurance companies and other investors, including hundreds of small investors.
As in the past, liberalisation and privatisation are being justified in the name of giving an impetus to economic growth. The people are being told that the reason for the slowdown of the Indian economy and loss of lakhs of jobs is the lack of capital for the creation of new productive capacities and services and for the creation of the required infrastructure. This justification is given to justify the maximum concessions and inducements being extended to Indian and foreign capitalists.
Innumerable incentives are being offered to the bourgeoisie for the “sake of reversing the slowdown.” The most recent being the announcement on 17th November of 3% interest subsidy on exports for five years with effect from 1st April 2015. Total annual subsidy is expected to be Rs 2500 to 2700 crore at current level of exports.
These steps are announced as ‘reforms’ to give impression to people as if they would improve their lives. The intent of the government was, however, clear from the statement issued by it while relaxing FDI, "The crux of these reforms is to further ease, rationalise and simplify the process of foreign investments into the country and to put more and more FDI proposals on the automatic route, instead of the government route, where the time and energy of the investors are wasted."
The government is hiding the fact that workers, peasants and toilers of the country are struggling today even to buy their daily necessities due to skyrocketing prices of essential food items. Peasants are not getting remunerative price for what they are producing. More and more workers are forced into low paying contractual jobs with no job security. While the market is full of goods, the workers and peasants have no money to buy them. That is the reason for the slowdown of the economy.
Capital centred policy
The government’s policy announcements have been welcomed by the lobbies of Indian capitalists like FICCI and CII. The Indian stock market also reacted favourably to the announcement as it considered them to be a confirmation of the continuation of capital-friendly policies by the NDA government.
The NDA government is vigorously going ahead along the course of globalization pursued by successive governments over the last 25 years at the dictate of finance capital. It is showing its utter contempt for the working class and toiling peasantry who have been continuously expressing their opposition to this anti national and anti social course.
To every country he has visited, the Prime Minister has taken the same invitation to invest capital in India, luring potential investors with promises of a liberalised environment. When he visited the US in September, in order to send a signal that his government would not delay approvals of deals, the Union government approved two major defence purchases from America just hours before his departure to the USA.The decision on purchase of these helicopters had been on hold for several years. but was suddenly approved. Now 37 helicopters for Indian armed forces will be purchased at the cost of Rs 20,000 crore ($3 billion) from Boeing Company of USA. As the purchase agreement would require thirty percent of value of contract to be procured from India, Indian capitalists like Tata, Mahindra and Ambani have also been putting pressure for the approval of such purchases along with US and other capitalists. The contracts provide for purchase of fifteen more helicopters in the future.
The foreign multinationals are not satisfied with the policy changes announced so far. They want access to Indian market, resources and labour without any restrictions on ownership and profits in all sectors. That is why despite all the inducements, FDI into India increased by only15% in the first six months of the year to $ 20.5 billion (Rs 133,000 crore) and most of this investment has been made into services, construction and IT sectors and not in manufacturing.
The government tells people that it is inviting foreign capital to create jobs for them. However, a large part of the FDI into India has been used to acquire existing companies which does not lead to creation of any new jobs.
‘Make in India’ mission will lead to only further exploitation of working people and resources of the country. The life experience of the working class and people of our country reveals that it does not matter which party or coalition is in power what will be implemented is the program of the big bourgeoisie. It is a state of the big bourgeoisie; different political parties are asked to manage it from time to time.
The anti people program of globalisation through liberalisation and privatisation needs to be resolutely opposed. Opposing this policy also means uniting the working class, peasants and other toilers to develop an alternative to the present state of bourgeoisie.
Royalty Payments by Maruti
Foreign capital uses number of ways to take the pro out of the country with the support of the government. Payment of royalty by Indian company to foreign parent company is one of the methods used over and above dividend paid out of profits. The royalty payment to the parent company is justified as a compensation for use of foreign brand name, for technical and management assistance by the parent company, for supply of technical know-how, etc.
Maruti is the largest car manufacturer of the country and owned by Suzuki Company of Japan. Workers of Maruti have been waging resolute struggle for the company’s anti-worker policies for many years. More than two third of the workers are on contract and paid one-third the wages of a permanent worker. On the other side, the royalty payment by Maruti to its parent company, Suzuki, have nearly tripled from 13 per cent in 2005-06 to 36 per cent of profit before tax and royalty in 2014-15. In 2014-15, Maruti paid royalty of Rs 2,767.7 crore to Suzuki. The total royalty paid to Suzuki Maruti in last five years has been Rs 11,870 crore, while the total profit before tax aggregated during these five years Rs 16,770 crore.
The government lifted restrictions on royalty payments by Indian companies to foreign entities in 2009. This was done in the name of making India ‘investor-friendly’. Between 2009 and 2012, 50 Multi-National Companies, operating in India, increased their combined royalty payments at a rate of 34 per cent annually while their profits rose only at 7 per cent a year during this period. Royalty payments are yet another way of transferring profits out of the country without paying any tax in the country.
Major FDI Relaxations Announced and Their Implications
Mission of Modi to Sell Indian Labour and Resources to Foreign Capitalists
Prime Minister Modi has visited several countries during the last few months to convince foreign capitalists to invest in India and to assure them of the full support of his government to make super-profits by accessing the huge Indian market and exploitation of the youthful working class of the country.
Prime Minister Modi visited Japan a few months back to persuade Japanese capitalists to invest in India. The Japanese prime minister and capitalists promised over Rs 200,000 crore ($35 billion) of public and private investment and financing in the next five years. The total Japanese investment in India so far is about Rs 80,000 crore ($12 billion) only.
During his visit to US, Modi met about 50 of the biggest American capitalists and multinational companies and told them how good a country India is to make big profits, how big a market it is for their products and how Indian state would ensure they have full freedom to exploit Indian labour. US capitalists, however, did not make any big commitments to invest in India but promised to consider his offer.
During his visit to UK in Nov 2015, Modi got promises of investment of more than $10 billion in insurance, telecom, health, and energy sectors.
Modi also visited Malaysia and Singapore recently, on the same mission of attracting foreign capital.