India’s overseas investments – some facts and meaning

This is a draft report that I submitted to an organisation early last year on the need to develop a labour perspective on India’s rising overseas investment in other developing economies. The report mainly analyses investments in Africa (esp Kenya and Sudan). It’s nothing great, but at least it grasps the urgency of developing such a perspective. It urges us to move beyond postcolonial anxiety and complexes in our understanding of India’s political economic location in global capitalism. At least, people in our neighbourhood and in economies far off, where Indian intervention has reached and increased, are beginning to understand the myth of third world homogeneity. See our interview with a prominent Bangladeshi Marxist, Anu Muhammad.

Download the report

For my earlier take on the issue,
Bush’s Passage to India: Why Does India Carry His Water? (Counterpunch, Feb 2006)

Indian Outsourcing Business Outsourced?

Growing pains dim India’s outsourcing edge

Tue Sep 18, 2007 11:45am IST

By Sumeet Chatterjee

BANGALORE (Reuters) – Indian outsourcing companies are shifting some of their operations to China, the Philippines, Vietnam and Kenya in a bid to stay competitive as higher wages, expensive property prices and a rising rupee eat into profits.

Back-office services companies thrive on doing jobs such as taking customer calls, payroll management and accounting at a fraction of the cost for big multinational firms or governments.

But costs in India are climbing on the back of a robust economy that has lured skilled workers to other sectors, forcing companies to look elsewhere to stay in business.

“If I was only in India, probably I would have been worried to death,” said Partha Sarkar, chief executive of HTMT Global Solutions Ltd.

The Bangalore-based back-office services provider used to generate all its revenue from India by providing services to its clients in the United States. But India now accounts for little over half the total, and rapid expansion in the Philippines and Mauritius has helped it offset the impact of a stronger rupee. It plans to enter China and Vietnam soon.

The company sees its 2008 revenue jumping to $150 million from $97 million in the last fiscal year.

“Three years back, I was completely exposed to rupee-dollar,” Sarkar said. “Now it doesn’t worry me. I have diversified my currency and country risk.”

In July, Infosys Technologies, India’s second-largest software services exporter, said it would buy three of Royal Philips Electronics’ back-office services units in Thailand, Poland and India to expand market presence.

The back-office services unit of the third-largest software exporter Wipro Ltd plans to set up two facilities in China to tap growing business opportunities there, its chief executive T.K. Kurien said.

India’s English-speaking workforce, a big factor in winning call-centre jobs, faces competition from countries like Kenya.

“When compared to India, we are better off in terms of salary and cost per seat, and we have a large pool of Kenyans with clear accents,” said Bitange Ndemo, permanent secretary in Kenya’s Information Ministry.

India’s share in the global back-office services pie will drop to 50 percent in the next 3-5 years from about 60 percent now, according to U.S.-based Tholons Inc, which offers management consultancy for offshoring.


India produces about 2.5 million graduates every year, versus 400,000 in the Philippines, but only about 15 percent are suitable for employment in the outsourcing sector.

U.S.-based outsourcer 24/7 Customer, which has multiple facilities in Asia’s third-largest economy, interviews 5,000 candidates a month in India, but is able to recruit only about 250, Chief Marketing Officer V. Bharathwaj said.

This is pushing up wages rapidly as financial firms from Citigroup and HSBC to Standard Chartered Bank employ thousands at their back-office hubs in India.

Starting wages at 15,000 rupees ($366) a month are still about one-fifth of what their U.S. counterparts earn, but they are rising 10-15 percent a year.

Cost per employee for a back-office firm in Bangalore is almost similar to Manila, but is 20 percent lower in Guangzhou in China and 35 percent cheaper in Ho Chi Minh in Vietnam, said Avinash Vashistha, chief executive of Tholons.

Analysts say that while Vietnam does not have a vast pool of English-speaking manpower, it is a prime destination for non-voice back-office services such as legal and medical transcription, claims processing, and finance and accounting.

Adding to the squeeze is the rupee, Asia’s best performing currency this year, which climbed to a nine-year high of 40.20 against the dollar, up 10 percent since end-2006, while the Philippine peso has gained more than 5 percent.

First Global Securities last month downgraded India’s IT services sector to “underperform”, citing the rupee and wage inflation. Every 1 percent rise in the rupee impacts the services firms’ margins by 30-50 basis points, analysts say.

“Everything is hitting us adversely,” said Kiran Karnik, president of the National Association of Software and Service Companies. “Wages are going up, real estate costs are escalating and on top of that you have the dollar exchange rate going bad.”

India’s back-office services industry, which earned $8.4 billion in exports in the year to March, is also being lured by tax breaks, infrastructure improvements and investment perks offered by China and the Philippines, he said.

The industry is also anxiously watching for any ripple effect from the U.S. subprime mortgage crisis, with some smaller firms feeling the pinch as U.S. companies trim spending on services.

However, Infosys’ outsourcing unit sees an opportunity here, reckoning that the need to cut costs would be even more prevalent in an economic downturn, potentially boosting business.

(Additional reporting by Helen Nyambura-Mwaura in NAIROBI and Rosemarie Francisco in MANILA)

© Reuters 2006.

On the logic of imperialism – US & India

To say that the US invasion of Iraq “was not all about oil” is nothing novel. The triviality of “all about oil” argument is perhaps most clearly shown in the works of Marxists like Cyrus Bina. When neoliberal economic journalists like Swaminathan S Anklesaria Aiyar criticise this argument, they ultimately circularly reiterate the same argument – not all about oil, but still all about oil. So he in one of his recent gems published on 10 March 2007 starts with saying:

“Many Indians, including respected foreign policy analysts, believe that the US invaded Iraq and ousted Saddam Hussein in 2003 simply to grab his oilfields. “Its all about oil,” they said. Well, it’s now four years since the invasion. Yet, we see no sign of the US grabbing Iraq’s oilfields”.

And ends by:

“The US still has a strong interest… in seeing that oil production in the Persian Gulf is not disrupted or monopolised by any military power. This was one reason why the US forced Saddam out of Kuwait, which he had invaded and occupied in 1990. The US Navy has for decades patrolled the sea lanes to ensure security for oil tankers. So, oil matters. But it is somewhat ridiculous to think that oil alone matters. The US invasion of Iraq was a terrible mistake, but it was not “all about oil.”

That’s just “one reason”, but in Aiyar’s write-up it is the only “one reason”.

Definitely, we cannot ask him to comprehend the dialectics of abstract and concrete, essence and appearance etc – the complex relationship between economy and polity, where we cannot reduce any to the other. Also, we cannot expect him to avoid the circularity of bourgeois economics.

However the interesting aspect of his article is the details which he offers to prove his “not all about oil” argument – when he draws parallel between Indian and the US oil interests:

“Those familiar with India’s oil policy will find the Iraqi controversy over production sharing [contracts to foreign companies] mystifying, even comic. India has long signed production-sharing deals with private and foreign oil companies, and nobody regards this as a sellout.

The latest bidding round this year drew 32 domestic and 36 foreign bidders. In production-sharing deals, the foreign or private sector partner bears all exploration costs, but shares with the government any oil or gas that is found. The terms of production-sharing have varied in different rounds of bidding in India.

But typically the winning bidder whether Indian or foreign first gets enough oil to recover costs of production and exploration (called cost oil); then gets two to three times as much as profit oil; and then hands over most or all of the residual production to the government.

For instance, the government’s share in gas at Reliance’s Krishna-Godavari field starts at roughly 15% at the beginning and goes to 85% in later stages.

The most successful foreign explorer in India has been Cairn Energy, which hopes to produce 7.5 million tonnes a year from its fields in Rajasthan. British Gas has also experienced some success.

ONGC itself has entered into production-sharing contracts in no less than 15 countries, including Russia, Vietnam, Sudan, Venezuela, Canada, Brazil, Nigeria and Cuba.

Reliance Industries has also signed production-sharing deals in Yemen, Oman, East Timor and Colombia. Indeed, ONGC and Reliance have jointly signed a production-sharing deal in guess where? Northern Iraq. This is not Indian imperialism. Nor have these Indian oil companies encountered US resistance.

So, Indian foreign policy analysts who think the Iraq invasion was all about oil, need to brush up their knowledge of the oil business. They are living in the past.

There was indeed a time when the US used military power to back US oil companies. When Mossadegh in Iran nationalised oil companies, he was overthrown in a 1953 coup masterminded by Britain and the US. However, that was the last act in the history of oil imperialism.

This was shown when OPEC countries in 1974 nationalised all oilfields, converting oil multinationals from owners to just buyers of oil. Some US diplomats and politicians wanted military action to regain the fields. But the US Administration ruled that the days of oil imperialism were over, and it was time to deal with sovereign governents.

The US still has a strong interest as does India in seeing that oil production in the Persian Gulf is not disrupted or monopolised by any military power. This was one reason why the US forced Saddam out of Kuwait, which he had invaded and occupied in 1990. The US Navy has for decades patrolled the sea lanes to ensure security for oil tankers.

So, oil matters. But it is somewhat ridiculous to think that oil alone matters. The US invasion of Iraq was a terrible mistake, but it was not “all about oil.”

Here Aiyar has given some facts, ignored even by leftists suffering from third worldism. They are relevant for understanding the material base of India’s expansionist, even imperialist ambitions. Private (foreign and domestic) and State capitalist production sharing is nothing new. In recent years, India’s state oil companies like ONGC have been proactively involved in satisfying the energy requirements of India’s capitalist development by their overseas exploration and operation. Aiyar also tells us that now private capitalists like Reliance are increasingly being given space in this industry, where the State had been the pioneer.

However, for Aiyar, if “this is not Indian imperialism” then there is no US “oil imperialism”. But why do we presume that there is no Indian imperialism? In fact, let’s reverse the order of the argument – if all such facts have grounded US imperialist interests in the Middle East and elsewhere (even if not just for oil, but “oil matters”), then the parallel that Aiyar draws between India and the US must tempt us to probe India’s ambitions too, without precluding their possible imperialist nature. Definitely, the export of capital is not sufficient to make a state imperialist, but what makes it so is the state’s capacity and interest in defending that export through international political intervention, of which war is just a part, as Clausewitz taught us. Maybe if “Indian oil companies [in their outward expansion in the Middle East have not] encountered US resistance”, this is just another proof that India is a part of the imperialist coalition led by the US, or the US sees it as as an ally. This would give us a key to interpret the tremendous growth in the US-India-Israel relationship too.

Of course, in capitalism collaboration does not preclude competition – there will be moments when collaborating interests would clash too. But we should not presume that if collaboration between US and India is occurring, it is a patron-client relationship. Likewise, competition too is not liberation, India’s frequent amorous passes to Russia, China and others are not necessarily anti-imperialist or anti-US.

Uganda – a case of ‘new’ imperialism

It is sad that a young Indian worker died in the recent popular protests against the sale of Mabira forest in Uganda to an Indian multinational, Mehta Group. The Indian government has also reacted and contacted the Ugandan government for ensuring the safety of the Indian community. However, it has nothing to say about the Mehta deal, as the Ugandan government and business themselves are fully behind it and are ready to secure Indian capitalist interests. The mainstream media in India and elsewhere is trying to equate the scenario with Idi Amin’s anti-Asian drive, which is a clear attempt to sideline the issue of Indian imperialism, how Indian businesses have usurped Ugandan resources. The Mehta deal is not only an environmental disaster, but would also destroy local farmers, by its monopoly. Obviously, the local resentment and growing competition within a saturated local labour market in the absence of an effective counter-hegemonic solidarity make immigrant workers an easy target, providing a pretext to defocus and delegitimise the genuine grievances and legitimise repression.

A report rightly captures some issues behind the Ugandan protests:

It is time Indian businesses stop exploiting native Ugandan people, imported workers from India and, Ugandan national resources

Arun Sen
Apr. 14, 2007

It is shame what the Indian businesses have done in Kenya and Uganda. They exploited native Ugandan people, imported workers from India and Ugandan national resources. The atrocities go beyond imagination. Two Indians were killed and a temple attacked by a mob in Kampala. The mob was protesting against the alleged cutting down of a protected rain forest by an Indian firm.

Business communities in India run these Indian firms. They bribe local Ugandan authorities to do anything they like. They care little about human rights and Ugandan national interests.

According to media reports, Indians in the Ugandan capital Kampala are still frightened and shaken after Thursday’s mob attack in which at least two Indians were killed and a Hindu temple attacked by a mob protesting the proposed expansion plan of an Indian sugar firm by cutting down a protected rainforest.

The mob attack was an act of terror. But what the Indian business community did in Uganda is equally deplorable. The Ugandan Government is responsible. They take bribes from the rich business community from India and let them exploit Ugandans and imported workers from India. If some one tries to protest the atrocities, the Indian businesses bribe the local authorities and put the whistle blower in jail. Many imported Indian workers from India were put in jail because they demanded humane treatment. At the end these imported workers go back to India losing all they had accumulated from savings in Uganda. They can get out of jail but lose their all savings. The mob was protesting at the move by the Sugar Corporation of Uganda Limited (Scoul), part of the Indian-owned Mehta group, to expand its sugar estates by cutting the Mabira rain forest- one of Uganda’s last remaining patches of natural forest. It has been a nature reserve since 1932.

…The controversy began last year when the Ugandan government ordered a study into whether to cut down nearly a third of Mabira- one of Uganda’s last remaining patches of natural forest.

The government’s proposal had angered many in the country who alleged that the environmental costs of slashing the forest would far exceed the economic benefits of the plantation.

Until 1972, Asians constituted the largest non-indigenous ethnic group in Uganda. In that year, the Idi Amin regime expelled 50,000 Asians, who had been engaged in trade, industry, and various professions. In the years since Amin’s overthrow in 1979, Asians have slowly returned. They continued their atrocities against civilized norm of society after returning back to Uganda. The mob outbreak is sad and deplorable. It is time for Ugandans to take control over their own country.

India as a neoliberal state

The relationship between multinationals and national states is not so simple today. A multinational draws its strength from its “multiple” identities and states compete with one another to ‘home’ it. With financialisation this competition among the states have considerably increased with ‘capitals’ seeking to regiment the ‘arbitrary’ state behaviour with the everlooming threat of flight of capital. However it would be wrong to consider this relationship as totally one-sided, as the proponents of ‘footloose capital’ make us believe. With increasing monopolisation (but never monopoly) the competition among capitals has intensified too, they struggle to establish their production and circulation bases to surpass competitors. This forces them to rely on particular states for protection and representation in negotiations for the acquisition of these ‘bases’. Of course, financialisation has increasingly instrumentalised the state, but this has made capitals increasingly dependent on this instrument too.

A neo-neoliberal state like India in recent years has remarkably shown its efficacy as an ‘instrument’. If something has made the Indian state emerge as clearly neoliberal, it is its proactive reclaiming of Indian diasporic “non-resident” capitals. Unlike the Chinese, which tried to attract the Chinese diaspora to increase the production capacity within its territory, the Indian state has increasingly instrumentalised itself by facilitating Indian capital (NR and domestic) expansion beyond its territory. In fact, the Indian government was proactive in international acquisitions like Arcelor and Corus, and for its many pharmaceutical multinational companies. Many of these companies are not at all dependent on Indian earnings or don’t have any plans to re/patriate their NR earnings. However, they have found in the Indian state a tremendous agency for their bargainings, increasing their ‘political’ leverage in the competitive world market. A dual citizenship to Non-resident Indians (NRIs) and People of Indian Origins (PIOs) was not to attract working class remittances or the grandchildren of indentured labourers, but to provide ‘Indian’ capital all over the world an ‘identity’. It is interesting to note that the initial proposal was to restrict “dual citizenship to PIOs from a select group of countries”, excluding especially the Third World PIOs. But this could have excluded a very fat lot that dominate wealth in many third world countries especially in Africa and Asia.

It would be interesting to see the Indian state’s response (taking into consideration that it has not shown any mercy to such resentment within its own territory) to recent Ugandan uprising against “a government proposal to allow the Mehta Group to clear a quarter of the Mabira forest reserve to grow sugar. The 30,000-hectare (7,400-acre) reserve, east of Kampala, contains some of the last patches of virgin forest in Uganda and serves as an important water catchment area.” (Guardian, April 13, 2007)