India's love-hate attitude towards FDI

I had barely entered my teenage years when I had to make sense of the news that Coca Cola was exiting India because of some government policies.  Rumors were even that the Indian government had forced Coca Cola to divulge the drink's secret formula, but, of course, those rumors were rumors and were not true. It was much later that I understood that the policy was one of the many that resulted from a deep suspicion of multinational corporations.  Coca Cola and IBM were two of the biggest names who wrapped up their India operations at that time.

Instead of sipping Coca Cola, I then had a choice of a very, very sappy "77 Cola" that the government introduced to mark the political earthquake of 1977 when Indira Gandhi and her Congress party were booted out of office. The alternative was Thums-Up, which was only marginally better and the one I drank if ever my parents gave me money for it--those were the days when drinking one of those was a luxurious gift!

That was decades ago and there has been a lot of proverbial water under the bridge since.  I now live in the land of Coca Cola, but very, very rarely do I drink any carbonated drink anymore.  India is now flooded with all kinds of sodas, and Coke and Pepsi are duking out there.  Foreign direct investment is now welcomed in India, though with reservations like the one that Ramesh noted regarding IKEA's plans.

So complete is the reversal of fortunes that IBM, which exited India in the 1970s, is now the second largest private employer--in terms of people employed in a single company--there and its employee count there exceeds the number of employees here in the US:

The last time that IBM made a public statement about its U.S. workforce was in congressional testimony in the fall of 2009, when it put its U.S. workforce at 105,000. It was at 121,000 at the end of 2007, and more in previous years.
At the time that IBM stopped reporting its U.S. headcount, it was beginning to appear that India was on trajectory to surpass its U.S. workforce. Crossing such a threshold is a symbolic shift more than anything else -- a globalization footnote. With a global workforce of 430,000, less than a fourth of IBM's employees are in the U.S.
According to an internal document obtained by Computerworld, IBM has 112,000 workers in India, up from 6,000 in 2002. IBM won't comment on this document or authenticate it, so this information has an asterisk next to it.

 IBM is not the only foreign company finding India to be quite profitable.  Foreign Direct Investment (FDI) is a significant aspect of the Indian economy:

The stock of FDI in India is now quite big—some $220 billion, or 12% of GDP, according to the Reserve Bank of India (RBI), the central bank. This includes everything from research centres in Bangalore to cement plants

I would not have guessed twelve percent.  But then, it makes sense if I think about my own brief professional life in India.

Of the jobs that I had in India after graduating with an engineering degree, my longest stint of nearly six months was with Indian Oxygen, whose parent company was British Oxygen.  My shortest was with Adyar Park Hotel, which was a part of the ITC group, which itself is partly owned by British American Tobacco--one of the "well-established businesses with deep roots in India and high profitability."

But, India can't seem to make up its mind on how much it should welcome FDI.  As the Economist notes:

[When] India is desperate to attract capital to fund its big balance-of-payments gap, the red carpet it rolls out is a little dusty.

Ah, that's India for you!