Like Blag Flag’s famous bait-and-switch for unexpecting household critters, India has become the international business equivalent of the Roach Motel — and its victims are cash-strapped American corporations.
Many American companies are lured into the country by “Make in India,” an initiative launched by Prime Minister Narendra Modi to bring companies to his nation. But after these firms arrive, they quickly realize India’s promised laissez-faire economic policies are extremely short-lived.
This shell game is akin to how some cellphone providers drastically hike service charges after the first month. But with Make in India, there is no fine-print. It is pure deception.
The worst aspect of India’s disinformation campaign is that American companies remain trapped. Extracting themselves from this draconian business environment is difficult for cost reasons. These firms just spent exorbitant sums relocating; most cannot afford do it all over again. And so, they remain stuck in their south Asian box, forced into submission.
While everyone seems to detest this deceptive operation, no one is doing anything about it. To topple this successful public relations effort, political leaders must first understand how and why it came about.
Everyone knows that over the past few decades, the America’s business climate has lagged behind that of other countries, from labor costs to tax rates. India, the world’s largest destination of direct foreign investment in 2015, has found success in taking advantage of our domestic problems.
India has not been engaging in bait-and-switch politics forever. For years, its conservative economic tendencies were a genuine response to the failed leftist policies of its past.
From the mid-1930s to the late 1990s, India was a socialist nation aligning itself with strong ties — militarily and diplomatically — to the Soviet Union. Not surprisingly, India was also one of the poorest nations on earth, mired in stagnation, industry nationalization, and the Soviet-style shortages inherent in most socialist economic systems.
Things began to change when the government recognized that socialism is a dead-end street. Economic liberalization started taking place. The country began encouraging foreign investment, repealing regulations, and bringing inflation under control.
Lured by the promise of a billion potential Indian customers, businesses began moving to the Indian subcontinent. Many are still there today. For example, to this day, IBM still has more employees in India than in the U.S.
Unfortunately, however, leftism is like a weed – it often finds a way to grow back. In India, it has been resurrected in near-full form.
Today, the Indian government is again lax on protecting property rights while quick on imposing new draconian tax and regulatory policies on American businesses. A Washington Post story noted that a 2012 amendment to the country’s income tax allows business to be taxed retroactively. Is it any wonder why India is now ranked 130 out of 139 on the World Bank’s “Ease of Doing Business” index – behind even Russia and Iran?
While the country’s politicians continue to make conservative promises, their actions do not match up with their rhetoric. Late last year, Prime Minister Modi, who was elected on the slogan of “Minimum Government, Maximum Governance,” unilaterally declared 85% of the country’s currency null and void. Writing at The Week, Shikha Dalmia declared:
Modi is taking his country down what Nobel-winning political economist F.A. Hayek called the road to serfdom, where every failed round of coercive government intervention simply becomes an excuse for even more draconian rounds — exactly what was happening in pre-liberalized India.
Many American businesses are now trapped between this free market rhetoric and heavy-handed dictates of the Indian government. Johnson & Johnson, for instance, has lost $10 million in the Third Quarter due to the India’s unexpected imposition of price controls. An American medical device company may also lose nearly three-quarters of a billion from this unexpected rate setting. This September, India’s railways ministry suggested General Electric pivot to making electric engines – two years after the company began planning and constructing its diesel factory.
In a short period of time, President Donald Trump has made incredible progresses in leveling the business playing field. He is slashing taxes and regulations, all while unleashing the entrepreneurial spirit that makes America great. He is working to ensure that American jobs stay at home and that companies have little reason to respond to the the flashy, misleading advertisements from other governments.
These domestic improvements will undoubtedly mitigate future conflicts. However, to further strengthen the American economy, U.S. Trade Representative Michael Froman should make an effort to rescue those who are already mired in “Make In India’s” Roach Motel.