NRI deposits are basically money of the wealthy business families of Indian origin settled abroad. With the Indian government offering them huge interest rates (compared to the measly 2% in international markets) and now full liberty to repatriate interest and capital, large amounts have, of late, been flowing into the country.

Earlier ‘aid’ was a major instrument of imperialist intervention into backward countries. It still continues today. Making countries dependent on huge loans, at high interest rates, was used as a method of controlling them. This reached gigantic proportions in the 1980s with the vast quantities of petro-dollars floating around the world. India, from its very inception in 1947, has been dependent on ‘aid’, of the notorious PL-480 type first, and later through multilateral agencies like the IMF, World Bank, etc. In the 1980s this ‘aid’ peaked in India as well. In the 1990s, though ‘aid’ continues as a weapon of neo-colonial control, it has been complemented with a wide network of other controls, like FDIs, FIIs, exchange-rate manipulations, etc.

Now having got some idea of what these terms actually mean, let us now look at the real ground-level penetration of foreign capital in this period of globalisation.

We have seen in Chapter II how the existing policies of the government are being continuously changed in favour of foreign capital. What we present now, is merely some of the major changes. But, thousands of other minor changes are taking place each week in some sector of the economy or the other, creating a vast network of incentives for FDIs that help it grow in both depth and extent. The pace of its growth in India, at both the Central and State levels, shows quite clearly that policy is now fully dictated by the imperialists and their TNCs, with the local Central governments acting as mere rubber-stamps.

Now the question that arises is that what is the problem with allowing FDI into the country? All parliamentary parties favour it, the entire media (visual and print) keep extolling its advantages, the bulk of the economists favour it (even the ‘left’ type say that it is needed in the core sector), and most liberals find it inevitable, even if undesirable. So what is the problem with it? Why then are we opposed to it?

There are a number of reasons:

First, international finance capital enters India, or any other third world country for that matter, not for philanthropic reasons, but to extract profits. And their profits go to their parent company, based in New York, London, Tokyo, Berlin, etc. So, whereas in indigenous companies the surplus generated stays within the country, and its expansion results in further industrialization (capitalist) and therefore employment growth; with these foreign companies (or foreign collaborated companies) the cream is siphoned out abroad, with no benefit to India.

Second, the rate of return on imperialist capital invested here is triple, quadruple, or even more than what it would earn in their home country. Ruthless exploitation of Indian labour, extraction of cheap raw materials, and little or no environmental restrictions give them windfall profits, which they could never even imagine in their home country. So, we find that the amounts actually taken out far exceed that put into the country.

Third, it is said that India lacks capital for investment, like on infrastructure, energy, etc. This is a big hoax. If the drain on monies extracted by the imperialists is stopped, if the over 100 billion in Swiss Banks by India’s comprador bureaucrat class is recovered, if the vast black money economy is confiscated (a mere demonetisation is enough), and if the gigantic wasteful unproductive expenditures on ministers, bureaucrats, MPs, MLAs, police and defense is drastically reduced — if all this is done, the country would generate ten times the capital that is now being got from abroad.

Fourthly, it is maintained that for advanced technology we need foreign help and collaboration. History has proved that the erstwhile socialist countries were able to undertake leaps in technology on their own, and their growth was in no way impaired by the imperialist embargo. Besides, what India needs is appropriate technology to develop the productive forces in the vast backward hinterland; not oasis of hi-tech amidst a vast desert of extreme backwardness. In addition, are not India’s best scientific brains serving in America for want of opportunity here?

And lastly, the type of industrialization promoted by these FDIs is anti-people, comprising luxuries and not the necessities of life, as profit margins with the former are much larger than those of the latter. This foreign capital has no social orientation whatsoever and develops an economy in its own image. With a market primarily geared to luxuries, it cares only in enhancing the purchasing power of the already wealthy (and an upper section from the middle-classes) while reducing the masses to further penury. But, as the vast masses are impoverished, it retards growth of the Indian home market, and therefore industrial development, leading to structural retrogression of the Indian economy.

In fact, of the total FDI coming into the country it is estimated that roughly 70% goes to buy up existing businesses in the country and only a small amount goes in setting up new enterprise. In other words, such capital is not employment generating. In fact, it enters bringing with it its sophisticated machinery (imported to India at inflated rates) thereby displacing a large number of jobs.

We find that FDIs have penetrated virtually every sector of the Indian economy. Table III.1 gives a picture of the extent its tentacles have spread:

Though the actual inflows are barely 21% of the approvals granted by the government, the above list shows the wide reach of the FDIs, penetrating all sections of the economy. Also, the large number of approvals in chemicals, electricals and transportation, with relatively less FDI amounts, indicates an extent of its penetration into the medium and even small scale sector. In fact, the de-reservation of a large number of items from the small-scale sector is to allow the FDIs of TNCs to swallow them up.

From this it is clear that FDIs seek total control of companies in which they invest. This we shall see in more detail in the section on take-overs.

So we see there is no stopping of the pernicious tentacles of FDI in India. The government has gone so far as to allow FDI into such sensitive areas as, insurance, banking, mining, defense production, media and now even the small scale sector, agriculture and handicrafts.

Portfolio investments are even more dangerous than FDI, as it only loots the country’s wealth without giving anything in return whatsoever. Today, the bulk of this is dominated by America, whose gigantic investment banking institutions dominate the world’s financial markets. It comprises part of the gigantic $ one trillion that roam the markets daily in the form of speculative capital. In India it plays havoc with our stock exchanges, rupee exchange rates, and now even commodity prices (including agriculture), which are being speculated on in the form of ‘derivatives trading’ (i.e. futures options, etc.).

Prior to 1990 there was barely any FIIs coming to India. In fact, even at an international plane, it was only in the last decade of the twentieth century that this type of capital came to dominate the world’s financial markets. There has been a spurt of such investment in India in the last few years. In the last financial year the amount of FII that entered India exceeded that of FDIs. A continuing loosening of controls has facilitated this penetration by successive governments — particularly by that of the BJP.

But this net figure does not give a full picture of the total FII operations in the country, which entails vast sums coming in and equally vast sums going out ( in their speculative activities) — and it is only the net figure that is quoted above. But it is the huge total figures that act to flood the financial markets of the country, resulting in a vice-like grip over them. For example, in the two years 2000 and 2001 a massive Rs 1,27,036 crores was infused into the country, while an equally large Rs 1,07,464 crores was taken out. Though the figures stated above are the net amount from these transactions, the actual profits made are from the gross figures taken in and out — through speculation.

In addition to this, companies have raised a huge $8.7 billion in GDRs (Global Depository Receipts) between 1992 and 2000. These are basically shares of companies sold in the European financial markets and held by foreign companies. They receive their dividends in the form of foreign exchange.

Therefore the total FII figure invested in India amounts to over $23 billion.

Now, with the BJP-led government opening out insurance, banking, mutual funds, etc. the entire financial sector of the country is coming under control and domination of international finance capital. The extent of control we shall see in the next Chapter; meanwhile, let us take a look at India’s huge foreign debt.

In the post World War II period, so-called aid has been an important tool of imperialist neo-colonial domination of the backward countries of the world. This ‘aid’ has gone to promote imperialist TNC interests in the country and for purposes of outright subversion. For example, ‘aid’ poured into the country to promote the ‘green revolution’ to further US agri-business interests in the country. Today vast quantities of World Bank ‘aid’ is flowing to the TDP government in Andhra Pradesh for supposed ‘rural projects’; but in fact to try and wean away the masses from the growing Maoist movement in the State. Those enormous funds are for nothing but counter-revolutionary subversion of the popular peoples’ movements to enable the government and police win over the ‘hearts and minds of the people’. They also come with stringent conditionalities and Structural Adjustment Programmes. The TDP’s various ‘Vision Plans’ are nothing but World Bank dictated reforms to be implemented in return for the loans taken.

Till March 2001 the total foreign debt was over $100 billion, (excluding NRI deposits) having increased from about $20 billion in 1980 and $83.7 billion in 1990. Of the $100 billion only 40% is at concessional rates of interest, while a huge $60 billion is paid back at market rates. The reason for the relative slowing down of net foreign ‘aid’ in the 1990s compared to the earlier decade, is that in this latter period most of the capital flows are now taking the form of FDIs and FIIs in which the return on capital invested is much higher.

Infact the situation is so bad, that since 1995/96 the entire new loans were not sufficient to cover debt-servicing charges. In other words, the entire new loans were being used only to pay back the international creditors. This is nothing but a debt trap.

Now let us turn to understand the impact this type of investment is having on industry and finance in the country and the extent of the control foreign finance capital asserts on Indian enterprise.