Investors may stay away from India for reasons other than the CAA protests.


Ever since the Citizenship Act, 1955 was amended in December 2019, protests have erupted across the country alleging the Act is biased and discriminates against Muslims. Over the last six weeks, opposition parties have thrown their weight behind these protests and the issue has now become deeply political, even as the government has insisted that it will not withdraw the amended Act and the matter has landed in court. This author will not delve into the issue of CAA per se (since enough has already been said and now the matter is sub-judice), but whether these have a larger impact on the India story.

When IMF Chief Economist Gita Gopinath, a celebrated economist and a woman who has broken many glass ceilings, makes a statement about CAA, it raises an important question about the India story getting tainted. After all, we have lost the tag of being the world’s fastest-growing economy and many feel the slowdown may be a long drawn one requiring the government to be aggressive, innovative and responsive to economic realities. Gita Gopinath’s contention that the protests will have an over-arching impact on future foreign investments is based on a flawed premise that these protests can be seen to be a reflection of political unrest—which it is not. As the world’s largest democracy, India rightfully allows space for dissent and debate and the protests against the Citizenship Amendment Act should be seen through the same prism. It is not a reflection of any instability in the government or a larger political unrest that can vitiate the investment climate.

Investors around the world love stability and put a premium on a strong government, which can take bold reformist measures. That is the only yardstick that will be used to judge India’s attractiveness as an investment destination. What vitiates India’s investment climate is a retrospective taxation on Vodafone PLC after it won the protracted legal battle against the government or cancellation of 122 telecom licences issued by the Union government. These were developments that suggested the decisions of the sovereign government were not sacrosanct and raised a question mark on companies’ India exposure.

Even today, what is worrying investors is the absolutely absurd (and some say insane) demand of the government for a share of the non-licenced revenues of telecom companies. This will mean an end of the telecom sector in India since the courts have asked companies to cough up nearly Rs 2 lakh crore in different cases.

Gita Gopinath is an important voice in the global business community and her message regarding India pertaining to CAA will carry weight, but will it be enough to swing the mood against India is the larger question. I believe it will not. What will impact future foreign investment into India is if the government does not display any intent and a roadmap for a long term economic revival and growth. And for that the Finance Minister needs to deliver a bold, reformist and forward looking budget and a larger plan to address concerns for the slowdown, and woo global investors. Unlike politics, business does not rely only on optics and perception alone, but on reality. And nowhere does that reflect more than in China. The autocratic country clamped down heavily on students’ and citizens’ protests in Hong Kong, which saw violent clashes between the citizenry and the government, and has set up detention centres for Uyghur Muslims in the name of re-educating them. Despite gross and blatant violations of human rights, the business climate in China has not been vitiated. In fact even with respect to the trade war with the United States, both sides have reached a compromise—signalling business as usual.

Prime Minister Narendra Modi has set a target of $5 trillion by 2024 and $10 trillion by 2029 and for that foreign investment is needed and we need to roll out the red carpet for investors and set in motion an economic vision. So what India needs to do is identify high growth sectors, boost exports by improving our competitiveness and invest in skills upgrade, coupled with a clear plan to lift people out of agriculture into manufacturing. If the Budget and future policy decisions of the government signal the same, the CAA protests will not matter for the global business community.

Yes, there are voices like that of George Soros—the billionaire hedge fund investor who has come down heavily on the Prime Minister and his government at Davos. This will build up a narrative and perception about India, far removed from reality. But will this mean Soros will pull out money from India and will other global funds also follow suit? Only when he finds more attractive opportunities. At the moment, Indian markets are touching record highs (and some like this author feel it is disconnected from economic realities). And hedge funds are booking profits.


As the dust settles on Jeff Bezos’ much anticipated and much talked about (for all the wrong reasons) India visit, I think the first set of people who will face the ire will be his “government relations” team, as frankly, it was a disaster for the world’s richest man to be in the second largest market of Amazon. For starters, it is very bad optics that the Competition Commission of India opened a probe into allegations of anti-competitive practices by the world’s largest e-tailer days before its founder and CEO were to visit. And despite the company ticking all the boxes, the government did not roll out the proverbial red carpet. What followed instead was a very pungent remark by the Commerce Minister, reflective of how most in government quarters view Amazon—with suspicion.

Many have said Goyal’s remark comes at a time when the economy is facing a long protracted slowdown and top dollar should be wooed aggressively. Of course, there is no denying any of that. But how much of Amazon investment will turn around India’s economic woes is the larger question. And is it time to take a good hard look at how large retailers like Amazon and Flipkart operate?

After all, there is enough anectodal evidence to suggest that pricing below costs—something that’s not allowed—does happen, more often than not. Every time a mobile phone or a laptop or any other high value item is sold at a substantial discount to MRP, offline retailers are disadvantaged and lose business and this impacts their economic viability. And this has been a recurring pain point for small retailers against companies like Amazon and Flipkart. The allegation is that large online retailers subsidise their marketplace business through other profitable ventures and may not be playing by the rule book when it comes to plain vanilla retail segments. Of course, all of these are allegations and nothing has been proven as yet, but perception is something even the world’s richest man cannot overcome so easily.

So when Amazon announces an investment of $1 billion into India, the question is who it will empower and more importantly, who it will disempower.

Every large business creates an ecosystem that leads to many allied businesses benefiting and that’s the role Amazon and Flipkart play. But equally crucial is to understand the socio-political-economic cost of displacement that takes place due to disruption with a large business or an idea. Some of this is welcome, like what economist Schumpeter espoused, political cost can also not be ruled out.

For instance, while there are some vendors who have become multi-millionaires on Amazon platform (100), there should be data on how many vendors have seen less than 100 hits on their website in an entire year! It is this data that can dispel doubts about Amazon’s supposed anti-competitive practices.

Until then we will have to wait for what the probe by CCI throws up.

Gaurie Dwivedi is a senior journalist covering economy, policy and politics.