By SWAMINATHAN S ANKLESARIA AIYAR
US President Barack Obama says India’s investment climate is unsatisfactory and limits foreign direct investment in too many sectors. Time magazine has run a cover story calling Prime Minister Manmohan Singh an ‘underachiever’. The outraged reaction of many Indians can only be called juvenile.
Such criticisms are so commonplace – most Indian critics have been saying the same thing for years – that they should not be news at all. Yet, many Indians have responded with an outpouring of angst, outrage and conspiracy theories. These are like the angry tears of a spoiled child. Come on, grow up.
Indian analysts and columnists have cried themselves hoarse about policy paralysis. So why get hot under the collar at the belated American discovery of India? Too many Indians yawn at criticism by their countrymen but go ballistic if a foreigner repeats the same criticism. This suggests a deep inferiority complex, a hangover from colonial times.
The government came out with an official reaction trashing Obama. Whatever for? Corporate affairs ministerVeerappa Moily said international lobbies like Vodafone were spreading false stories, and Obama was not properly informed about India’s strong economic fundamentals.
Ridiculous! Capital goods production has been plummeting in India for a year, clear proof that not even Indian industrialists are investing. Many of them have said they are investing abroad because conditions are easier there. When such complaints are pouring in from every corner of India, it is hilarious for Moily to claim it is all a plot of Vodafone.
Industry minister Anand Sharma declared, “policymaking is a sovereign right,” and claimed that India actually had a very good investment climate that was attracting foreigners in a big way.
This will induce many sniggers, because Sharma himself was foiled by his coalition colleagues last year while trying to promote foreign investment in multi-brand retail. Instances like Sharma’s humiliation are precisely what Obama is complaining about.
Suppose Manmohan Singh gives an interview to an American journalist, and suppose he repeats the criticisms Indian businessmen routinely make about the US. The American media would ignore Singh’s remarks as old hat. Obama’s remarks merit the same treatment.
US businessmen say the US corporate tax rate at 35% is one of the highest in the OECD, and hurts their competitiveness. US income tax, capital gains tax and estate duty are so high that some US businessmen – like Eduardo Saverin, co-founder of Facebook – have migrated to Singapore, which has far lower taxes. Recent US legislation (including the healthcare law) has hugely increased the regulatory and financial burden of US corporations.
For instance, compliance with the Sarbanes-Oxley law costs corporations $2 billion per year, and results in annual reports hundreds of pages long. Indian companies like TCS originally aimed to list their shares in the US, but found Sarbanes-Oxley so burdensome that they decided to list instead in Europe.