The Tribune, Chandigarh, India

Does microcredit reduce rich-poor gap?
by Jeremy Seabrook
ONE of the fastest-growing aspects of development in recent years has been microcredit. This has become so universal that it has been hailed as the answer to poverty, a panacea for underdevelopment. It has everything: empowerment, participation, upliftment. And what is more, poor people who cannot get access to credit through banks are proving themselves far more reliable than big corporate borrowers in paying back what they owe.

MIDDLE

Hooked on beedi
by M.P. Hogan
AS an avid smoker, my visit to India has been greatly enlivened by the discovery of beedi. I like the packaging, to start with — so different from a regular packet of cigarettes; the purple printing on the simple white wrapper, the grand heraldic trademark, and the bit of red twine that holds everything together inside. I like the colour of them, the texture of the tightly wrapped leaf, the rich cigar-smell of the tobacco. Beedi is a worthy addition to my smoker’s armoury, but they are by no means the first...

WORLD IN FOCUS

A post-reform assessment of MNCs
By M.S.N. Menon
WHAT has been India’s experience of the MNCs over the past decade? Have they been able to keep their promises, or have they only proved our worst fears? Judge for yourself! In trying to impose on the world a Multilateral Agreement on Investment (MAI), the WTO gave away its true intentions about globalisation: it was to provide legal right to MNCs to invest wherever they wanted, and to give them access to every market.

75 years ago

May 5, 1925
Nationalism and Education Minister
WHILE the requirements of the general national interest failed to induce the Education Minister to agree to eliminate notions of communalism from the sphere of education, that very Minister had no hesitation in invoking the aid of ‘Indian nationalism” in his attempt to meet another amendment of Pandit Nanak Chand’s.

Complete IT-friendly man

A GENEROUS Mr Yashwant Sinha has lavished so many juicy tax concessions on the computer industry that it has gratefully hailed him as a complete IT-friendly man. Virtually this sector will go outside his revenue-raising efforts. Exports of software is free from income tax until 2009-2010. Since this year it hopes to earn $6.5 billion, even a token 10 per cent tax would have netted about $400 million or Rs 1720 crore, assuming that $2.5 billion goes as salary. This is being really large-hearted from a Minister who saves small amounts by cutting food subsidy to the very poor. Another IT-related sector, venture capital, can now go through the green channel, and no tax question will face it. This is a new-fangled concept to finance software start-ups and this tax holiday can attract about $3 billion in new capital, industry sources claim. In fact, the venture capital can duck payment altogether if the loan-givers collect their profit as dividend after three years. Another innovation relating to the industry is ESOP (employees stock option plan) under which a new comer is offered comparatively a lower salary but given some company shares. The government wanted to treat this as a perk and tax it. Now the levy will be due at the time of selling the shares. Since there is always a lock-in period (to keep the worker tied to his job), and since long-term capital gains attract low tax, the IT-industry is triply blessed. In fact, Mr Sinha has conceded every demand of this sector.

Two other areas which have drawn his munificent attention are housing and pharmaceutical research. Interest payments up to Rs 1 lakh can be deducted from the tax liability. Since the going interest rate is around 13.5 per cent, loans up to Rs 8 lakh will be virtually interest free. It is amazing that the tax deduction limit has jumped more than six times within three years, from Rs 15,000 to Rs 1 lakh. Last year the limit was hiked to Rs 35,000 and this year first to Rs 75,000 and now to Rs 1 lakh. As a result, cement sales shot up by 22 per cent. Mr Sinha wants the trend to get entrenched. The expenditure on research will not only be tax-free but an additional amount equivalent to 50 per cent can be taken out of tax liability. At present only two drug firms — Ranbuxy and Dr Reddy’s — have research facilities worth the name. The hope is that more companies will do serious work in this regard and maybe foreign drug makers shift their base to this country attracted by the concession. As was widely expected, the Finance Minister has extended tax exemption to the newly setup special economic zones earning a thank-you from Commerce and Industry Minister Murasoli Maran.

The steep increase in the customs duty on tea and coffee will come as a surprise to many. India is traditionally a coffee and tea-exporting country and so why this impost on imports? There is a story behind this. Last year Indonesia exported about 9 million tonnes of cheap tea varieties — up from 500,000 tonnes the previous year — and the price started falling not in the open market but at tea auctions. Big and powerful companies like Tata Tea and Hindustan Liver protested angrily, and as a protectionist measure the import duty has gone up from 15 per cent to 35 per cent. Small biscuit makers can now smile at the total excise duty exemption and anti-malarial drug will become cheaper since the basic component e-mal will attract lower duty. Except in the case of IT industry, there is no clear-cut design in the tax changes and this is because he has merely responded to powerful lobbying by the affected sectors. This a big weakness in a person who repeatedly expressed his determination to bite the bullet. As one newspaper bitterly wrote on his budget proposals, he has again missed the bullet but has bitten his tongue.

Bindra’s bombshell

MR I. S. BINDRA has carried out his threat of going to town on the issue of corruption in cricket if he was not given an opportunity by the International Cricket Council to share with it the match-fixing-related information. Heavens would not have fallen had he been allowed to present his case during the two-day special "match-fixing" meeting of the ICC in London. He was allowed to attend the emergency meeting as a delegate while he wanted the right to present evidence of wrong-doing by players and administrators. As former President of the Board of Control for Cricket in India he may indeed be privy to information which could help throw light on the scale of corruption in the game of cricket. Unfortunately the game is now being controlled by those whom history may remember as the "demolition men of international cricket". Mr Bindra's presentation of "evidence" at the crucial meeting could have been a source of personal embarrassment for ICC President Jagmohan Dalmiya. Mr Bindra had injected avoidable elements of bitterness, bordering on naked hostility against Mr Dalmiya, while reacting in India to the issues the Cronje tapes had thrown up. Like a determined hunter he virtually stalked Mr Dalmiya all the way to London evidently in the hope of humiliating his old bosom friend in the presence of representatives from all the Test cricket playing countries. Cut up, as he must have been, over being refused permission to present his case before the "supreme court" of international cricket he decided to make public allegations against a giant of Indian cricket. He made the charge without bothering to check out its veracity "because I had to leave for London for the ICC meeting". Mr Bindra is not only a seasoned cricket administrator but also a senior bureaucrat. He should have exercised restraint in making charges which have the potential to cause further damage to Indian cricket. He has turned the match-fixing controversy, based on Manoj Prabhakar's version, in to a suspense thriller with an unexpected ending.

Ever since Prabhakar made the claim that he was offered Rs 25 lakh by an unnamed senior cricketer to play badly during a one-day match in Sri Lanka in 1994 the media-guided needle of suspicion was pointing in the direction Mohammad Azharuddin. But Mr Bindra claimed in an interview given to CNN that Kapil Dev, "an icon in the cricketing world", was the villain who tried to bribe Prabhakar into playing below par. Cricket fans had been manipulated by some magazines into believing that Azharuddin was corrupt. But they may demand concrete evidence for accepting the allegation that it was Kapil Dev who had tried to fix a match. According to Mr Bindra, the name of the "icon" has been mentioned to him by Prabhakar. However, to say that the former BCCI chief has stolen the thunder from the ICC, because of the sensational television interview, may not be correct. The meeting did not generate any thunder for any one to steal. It began with a whimper and ended with a more feeble whimper. The recommendations the representative of the nine Test playing countries made for dealing with the problem of rampant corruption do not reflect the crisis international cricket is facing after Hansie Cronje confessed to having accepted money from a bookie. The main concern of the delegates was evidently to "remain united" rather than do some plain speaking for identifying the black sheep in cricketdom. Who floated the ill-considered proposal to grant amnesty to players who confess to having indulged in acts of wrong-doing? The Australian Cricket Board should have been rapped on the knuckles for trying to cover up the acts of misdemeanour of Shane Warne and Mark Waugh. The delegates should have asked the ACB to explain why it did not ban the two players from representing their country after they were found to have accepted money-for-information from a bookie. And free flow of dirty money is not factor which is responsible for bringing disrepute to the game. The use of vulgar gestures and profane language by players in full public view too has contributed substantially to making cricket a game which gentlemen now dread to play. Australian children may grow up using foul language in public. Indian children are brought up differently. They would think twice before making a vulgar gesture on the field because the live coverage of international fixtures means that their elders too would be watching the game and their actions. The ICC has at long last woken up to the need to put into place a law for slapping life ban on players found involved in match-fixing and other acts of misdemeanour. It should also introduce a law for banning sledging and making vulgar gestures on the field. Whatever the Australian administrators may have to say to justify the uncouth behaviour of their players the spirit of the game is also being damaged by those who justify and patronise ungentlemanly conduct on the field.

The Wind-Blown Economies
A disconcerting view of stock markets
by Darshan Singh Maini

AS one whose interest in the dynamics of our stock markets is chiefly “academic”, unlinked to “the intricacies of the moneterist’s economics”, or to fiscal philosophies as such, I had some years ago responded to the volatility in stock exchanges in a “middle” called “Bulls and Bears”. And I think, even in that light piece, my argument tended towards the uncovering of the darknesses and depths that lay beneath the glow and glitter of princely fortunes made, at times, in a fairy-story manner. Today when the world stock markets are in a crazy spin, following an alarming slide in Nasdaq, and the small, individual stock-holders are in a state of panic, it was the right moment, I thought, to get into the nature of this business which keeps the wheels of industry, and of fortunes, in motion. And when we remove the wraps, the spread on the table reveals, on the whole, a very disconcerting picture.

If one takes, to begin with, a linguistic view of the matter, the mere idiom in use should show the essentially jungle nature of the fortunes thus built or lost. For the bulls and bears of the bourses are about as reliable an index of the reality of things as these animals in their own habitat, aggressive and powerful, or sluggish and snarling in obedience to their own instincts. The metaphorical use, therefore, is picturesque enough to establish the premise of our argument: to wit, the Darwinian doctrine or laws that define the bottomline of this business. Even when one accepts a more charitable view of the matter — the word “share” implying one’s silent partnership in an enterprise that activises one’s savings and yields reasonable returns — it should still remain a question of hazard, of disquiet, and at times, of sheer disaster. That kind of fortune rests on a sand-dune, and the desert winds can, any moment, reduce such mansions to dust and rubble.

In fact, a deeper view of the things cannot but suggest one agonising fact forcefully — the essentially amoral, if not immoral, nature of the stock market “philosophy”. Also, at another point, it shares the nature of earthquakes, typhoons — and high tides. You cannot argue about the geological disasters or changes, and for the common man, and even for some theologians, these are in God’s will, a manifestation of His wrath, whatever the scientists may say in regard to the geological shifts and slides.

Though the human nature has always remained close to “the origin of our species” despite the refinements of civilisation, the incursion of “the jungle” in our advanced economies is, therefore, a question only of extension. If the brutish aspects can be controlled — and the market-driven economies have such mechanisms — things would go right. But where and when the animal aspect may surprise you is vastly uncertain. And this does result in huge eclipses of the heart, and huge darknesses of the spirit. The brutal aspect has turned thus into a massive metaphor for the economies that are predatory and, therefore, powerful. To take the argument back to the “Mecca” of such forces — the United States of America — one needs only to recall Upton Sinclair’s shattering novel, “The Jungle” written just a hundred years ago when the ruthlessness of American capitalism was chiefly a domestic phenomenon. The story of open oppression and dehumanisation enacted against the backdrop of the Chicago meat-yards is chilling enough to give one a peep into the ravaging or savage nature of businesses where human beings are turned into commodities and tools. All this, in today’s state of the nation may sound silly and unreal, but a little thought would show that the use of the Marxian idiom is just a convenient shorthand to show the ghostly nature of a dream hoisted on heaps of bones. I realise I’m using the idiom of moral outrage to describe as clear a phenomenon as the crisis in stock markets, and the inevitable “domino effect”, but I do so as much in grief as in anger. For the tide of “globalisation” and “liberalisation” which has created a new level of awareness seems also to have swept even the intelligentsia off their feet.

It’s not clearly recognised that the so-called “tiger economies” — of Taiwan, South Korea, Singapore, Malaysia, etc — became an indispensable requirement of the neo-colonial economic imperialism of the West after the disintegration of the British and other White Empires. To sustain their own economies and put them on a level of affluence (with the Cold War conflict still a visible threat, and a sullen awakened dragon-China on the upswing), they needed client-economies for a sustainable development in their own standards of living. Thus the economic hegemonism became the new doctrine of domination.

The great American and European corporations having nearly exhausted their own natural resources, with the USA keeping its oil and mineral reserves in check, and creating “the black oil” economies of the Arab lands and Sheikhdoms with its military might and striking powers, and with the communist “menace” as a clear “moral” for corrupt and autocratic and totalitarian kingdoms, the creation of a string of global affluent satellites to preserve “the old world order” in new forms and aspects became a part of the grand Western conspiracy — or of diplomacy, if you like. And in this envisaged global scenario, the colonial Africa, Latin America and the most populous but impoverished Asian countries were to be allowed some crumbs from the high table, some breathing space in obedience to the imperatives of the economic compulsions and urgencies. And if a China or an India could no longer be “contained” — and this took nearly half a century or so — the new “contenders” had to be brought within “the charmed circle” with all manner of baits and threats, of open and covert pressures.

No wonder, those who called the South-East Asian pockets of growth “tiger economies” had not forgotten the Darwinian lesson. And the giant economy of post-war Japan built again on the classical imperialist canons, taken from the West, became, along with the more powerful western nations, a redoubtful outpost in the East of the G-7 combine.

I’ve strayed some distance from the highways of our primal argument with its locus in the nature or character of the stock-exchange disasters, and the resultant volatile state of corporate as well as personal fortunes. Now the stock-exchange upheavals have come to be regarded as something “ordained”. Yes, “ordained”, but not by the Lord in heaven, but his Lutherian-Protestant overlords of the West about whose money-making “ethics” Max Weber wrote so penetratingly earlier in the last century. Thus, the “angiographic” lines on the TV screen make as crazy a pattern as the songs of Yeats’s “Crazy Jane” poems. The buried darknesses and the depressions come to the surface to dip again, rise and fall, and thus perpetuate the dance of contingencies and discontinuities.

But this argument would remain incomplete without returning to the moral assumptions of the extended discourse. The point which, among other humanist economists, has been so eloquently advanced by our own Nobel Laureate, Prof Amartya Sen, clearly highlights the link between affluence and happiness to such goods and services of the spirit as magnanimities and compassion. For the basic uncompromising concern for the impoverished, the deprived and the slighted of the earth, who vastly outnumber the affluent elites or their appeased lower middle classes, can in no way be controverted. All that such economists advocate is a verifiable basis for equitable and just distribution of the earth’s fair resources. For, as things obtain now, one country’s “paradise” is contingent upon the “hell” of the countries marginalised for several complex reasons.

Here I’m reminded of a point I made in an article over a decade ago. How come, I asked, a person’s house or property, land-holdings, etc, become in 20 years’ time or so such a massive fortune (sometimes jumping in value from Rs 1 lakh to a crore or more) when in actual fact, with time and age, they have become physically infirm and exhausted? In other words, brick stone and cement (or real estate, as they are pleased to call properties) have an intrinsic power of phenomenal growth in themselves, regardless of the real condition of the owner — perhaps a pensioner struggling for survival, a lonely, aged, sick person, whose fortunes have dwindled in proportion to his progress in years! Ironically, the matter has triumphed over the spirit, and acquired a strange, ghoulish “life” of its own. And when one is gone, it keeps increasing in value, in power! A posthumous existence in wills and papers and documents.

To conclude, my “economics” and “ethics” are as closely linked as my politics and my poetry. To make gods of abstract forces, or forces of chance and contingency, is to turn one’s face away from the goodness of life, and from its multiple manifestations. Not Lakshamipuja, but a reverence for the eternal spirit of man may bring you the cherished or sought nirvana.

Does microcredit reduce rich-poor gap?
by Jeremy Seabrook

ONE of the fastest-growing aspects of development in recent years has been microcredit. This has become so universal that it has been hailed as the answer to poverty, a panacea for underdevelopment. It has everything: empowerment, participation, upliftment. And what is more, poor people who cannot get access to credit through banks are proving themselves far more reliable than big corporate borrowers in paying back what they owe.

The success of microcredit depends upon acceptance of a reality which, until recently, no one seriously believed — that the poor are more honest than the rich, that they take their debts seriously and do not shirk from paying them. In the early 1980s, the success of Ela Bhatt’s SEWA in Ahmedabad, which made loans to very poor women, became a model of small-scale credit. Later, Dr Muhammad Yunnus’ Grameen Bank became the standard-bearer of microcredit on a wider scale.

Today, there is scarcely any self-respecting non-government organisation that does not have microcredit as its principal component. All the aid agencies now love it. Microcredit is the flavour of the millennium.

Surely, there must be some drawback with anything that attracts such universal acclaim? It seems not. Everyone can get — well, if not rich, at least much better off — without anyone being harmed. It is the ultimate win-win situation.

Poor people can take loans for small businesses, from vegetable vending to cycle repairing, from gardening to keeping chickens and ducks, from buying a cycle-rickshaw to selling flowers. And the repayment rate of the loans — and hence success of the businesses — is remarkably high: well over 90 per cent for most schemes, which is, apparently, higher than the level of formal bank-loan repayments. The voice of repentance is heard, that the poor could ever have been so misunderstood, so mistrusted, let alone called lazy, idle or unreliable.

So intense has been the scramble to offer microcredit, that all NGOs try to distinguish themselves by some slightly different inflection, some variant on the basic principle. Thus, one will say, we allow people to repay weekly rather than monthly, or even any time they choose; others say, we make sure the loan is applied for something socially useful.

There are problems from time to time. One NGO is accused of browbeating its beneficiaries into repaying. There are stories of people taking a loan from one NGO and the following year they have to take a second loan from another in order to repay the first. But these do not really disturb the general acceptance that a way has at last been found to integrate the poor, to attach them to society by silken bonds rather than by the chains which bound them to moneylenders and exploiters.

So, who could find anything to object to in such a benign world? After all, some of the schemes have been so successful — notably SEWA and the Grameen Bank — that they have attracted funds from the World Bank.

First of all, microcredit, especially in poor countries (and it is significant that it is identified overwhelmingly with Bangladesh), is a vehicle for redistribution between the poor and the very poor: the profit from, and interest paid, even on small loans, must come from somewhere. The customers and clients of the beneficiaries are the poor, those who use the services for indispensable daily necessities — buying vegetables, carrying produce by rickshaw or cart, providing soap, toothpaste, biscuits or cigarettes.

The services the beneficiaries offer are often instrumental in furthering the economic function of those even poorer than themselves. The money that flows through the microcredit schemes comes mostly — though not exclusively — from the poor. This has the effect of raising some people out of poverty, while entrenching others more deeply in it.

There is no doubt that the lives of millions of individuals have been transformed; but at the same time their very success has the effect of impoverishing others who depend upon them. For instance, with 5,000 taka (US$100) in Bangladesh, a poor man or woman can buy a cycle-rickshaw. It will then be hired out to someone at 40 or 50 taka a day; and only when he has repaid that fee will the hirer earn anything for himself.

The poor are not a static group who, one lifted out of poverty, cease to know want. The poor, the very poor and the destitute are a shifting population — depending upon the circumstances of their lives (when they have young children they are very poor, when their children earn they become better off, when their children are young adults they may cease to be poor, but when they are sick old they may fall back into poverty again).

The poor also are those whose land is washed away by river erosion, floods and other natural catastrophes; those who go into debt for the sake of dowry, the victims of land-grabbers and other forms of organised, and often political, crime.

Microcredit schemes have high rates of interest; not as high as those charged by traditional moneylenders, but at 18 per cent or 20 per cent the amount of money to be found is often hard to find. Some schemes (such as Proshika in Bangladesh) charge interest not at a fixed rate, but at a declining rate, as the capital is paid off, which effectively reduces the interest to 10-12 per cent.

Microcredit is a way of helping certain sections of the poor. But the money that is recycled between the various strata of the poor leaves the great gulfs of inequality between the rich and the poor untouched. In Bangladesh, 47 per cent of the people still live in “absolute poverty”; and the total proportion of landless (that is, those with less than 50 decimals of land) is 57.5 per cent. Per capital availability of land, even if it were possible to distribute it fairly, is 0.18 acres.

The eagerness with which the West has acclaimed microcredit suggests that it is seen as a painless way of ending poverty, without redistribution — a policy that is now off limits in the great drama of globalisation. What microcredit does is to give the enterprising poor, the able and competent a chance of modest prosperity, often at the expense of the poorest, and certainly not at the expense of the middle class and the rich. It is as much a means of anticipating and suppressing dissent as it is a solution to the issue of poverty. — TWNF

(The writer, a freelance journalist based in London, has authored may books.)

Hooked on beedi
by M.P. Hogan

AS an avid smoker, my visit to India has been greatly enlivened by the discovery of beedi. I like the packaging, to start with — so different from a regular packet of cigarettes; the purple printing on the simple white wrapper, the grand heraldic trademark, and the bit of red twine that holds everything together inside. I like the colour of them, the texture of the tightly wrapped leaf, the rich cigar-smell of the tobacco. Beedi is a worthy addition to my smoker’s armoury, but they are by no means the first...

I first discovered there was more to cigarettes when I went to Paris at 17. With an unfiltered Gauloise dangling out of the corner of my mouth, I needed only a black polo-neck sweater and a well-thumbed copy of something by Jean Paul Sartre to be the ultimate in le cool.

Austria, Italy and Spain presented me with new brands to try, but none stuck in my mind, whereas Russia was something else again. In Leningrad I watched fishermen on the banks of the Neva smoking what looked to be cardboard tubes. Closer examination revealed about two inches of tobacco attached to three inches of hollow cardboard — a cigarette with its own inbuilt holder. They took a while to get going, tasted utterly disgusting, and made me realise that any attempt to get closer to the inscrutable soul of the Russian people would have to begin and end with drinking vodka and reading Doctor Zhivago. No wonder, I thought,that Soviet authors were such a gloomy bunch.

Back in the USA smoking took on a new dimension when, wishing to emulate Huckleberry Finn, I bought a corncob pipe. I can still see myself, standing proudly on the deck of the New Orleans ferry, scanning the wide level waters of the Mississippi, with my jaws clenched in the desperate rigour of keeping the pipe at what I considered to be a rakish angle. Pipe smoking lasted as long as it took the ferry to dock at the opposite shore, although the pipe itself went around with me in my pocket for several weeks after, a tangible reminder that life should not try to imitate art.

In Mexico there were cigarettes called Olivados, oval in cross-section and 24 to a pack. In the crumbling economy of Castro’s Cuba, cigarettes could be bought for the equivalent of Rs 3 for a pack of 20 and, in what I can only conclude to be a point of Communistic solidarity, tasted just as disgusting as those from Russia.

But beedis are something unique in my experience, and I have to say I rather like them. I can even smoke a whole one now without having to relight it halfway through. My first experience of India’s native brand came about in rather an unusual way.

Two friends and myself were hiking up above Mashobra, and came upon a greenhouse set on the top of one of the highest hills. The lady who tended the plants there invited us in and, while we made ourselves comfortable on canvas chairs, took a package of beedis from her trouser pocket and offered them round. It seemed appropriate to be smoking a leaf-wrapped cigarette in among the earth-rich beds of seedling garden flowers. A little surreal, of course, but then that’s part of the pleasure.

Which is why, if ever I sit down to write the definitive aesthetics of cigarette smoking — a sort of Compleat Angler of nicotine — I shall call it, in honour of the occasion, The Greenhouse at the Top of the World.

A post-reform assessment of MNCs
By M.S.N. Menon

WHAT has been India’s experience of the MNCs over the past decade? Have they been able to keep their promises, or have they only proved our worst fears?

Judge for yourself! In trying to impose on the world a Multilateral Agreement on Investment (MAI), the WTO gave away its true intentions about globalisation: it was to provide legal right to MNCs to invest wherever they wanted, and to give them access to every market. The idea was to take away the power of governments to regulate the activities of the MNCs. It is time to make an assessment of what the MNCs have been doing in the past decade.

It was said of the MNCs that they would bring in much needed capital, higher technology, management practices and a worldwide market access. Have they fulfilled these expectations? Hardly. MNCs have brought very little capital to India compared to what they have invested in China. As for technology, this is what Mr Tarun Das of CII had to say: That MNCs never delivered what they promised in technology. After the tie-up was consumated, he says, the MNC wanted an upper hand in running the venture through raising its stake. This was objected to by the Indian party. As for market access, although the MNCs are committed to export, they have hardly fulfilled this obligation. The main goal is to exploit the domestic market.

As far as foreign institutional investors (FIIs) are concerned, they thrive on political turmoil. It is a myth to say that they look for stability. Political instability depresses stocks. It is then that the FIIs raise their stake in the capital market. Indian stocks, even otherwise, are among the cheapest in the region. Hence its attraction.

MNCs have manipulated the value of their shares to raise the holding of the parent company. To give one instance, Castrol Ltd bought 3.5 million shares at Rs 110 per share when the market price was Rs 1100 per share. Many MNCs raised their stake above 51 per cent in this way by mere manipulation of share value.

Many joint ventures ran into trouble or broke up because the foreign party tried to acquire 100 per cent holding in the venture. There was also the acrimonious case of Suzuki wanting to control the appointment of the Managing Director of Maruti Udyog.

Indian companies have been demanding a level playing field because most of the foreign companies have decisive advantages over the Indian ones. For example, foreign companies pay only a nominal interest on capital they borrow, whereas Indian parties have to pay much higher interest rates.

FIIs control close to 10 billion dollars of various types of investment in the country. This is a matter of concern.

Tax evasion is rampant among the MNCs. The Income Tax Department has already launched several offensives. MNCs have admitted the existence of such practices. Most of the evasion were in the nature of non-payment of tax by foreign employees of these MNCs. Many Japanese companies were caught in this net. About 50 of them offered to pay up. This was the case with Daewoo’s workers too. Those who came up with voluntary disclosures were treated “leniently”.

Notices have been issued by the IT Department to scores of other MNCs in the last few years. A BJP MP has charged that the government was losing Rs 3000 crore in income tax revenue by withdrawing notices already issued against FIIs who have been evading taxes by misusing the double taxation treaty between India and Mauritius. It is said that Finance Minister Sinha was forced to withdraw the notices for fear of offending the FIIs and creating a financial crisis.

About 24 FIIs were involved in misusing the Mauritian route. The establishment of these offshore subsidiaries is actually a contravention of international law.

It will be recalled that during the recent financial crisis, the over-valued infotech and media stocks lost half their values. As such, the Government of India should not have condoned these practices by FIIs. The point is: this violates even the treaty between India and Mauritius. According to the BJP MP, most of the 492 FIIs with registered offices in the UK, the USA, Hong Kong, Singapore and Australia have opened conduit offices in Mauritius to take advantage of the loophole. It is even said that these FIIs threatened to withdraw from India if the notices were not withdrawn.

How did they come to possess this awesome power to blackmail the Finance Minister? Because in the broking business, eight out of 10 brokers by volume are foreigners. They work together with other MNCs, foreign banks and foreign rating agencies. Why did we allow this to happen?

There is constant interference by the FIIs in the stock market today. The MRTPC charged a foreign mutual fund company of manipulating prices of BHEL stock. As BHEL carried a substantial fund of US pensioners, this was highly suspect.

In Punjab, MNCs dealing in pesticides and insecticides have evaded sales tax to the tune of crores.

Hindustan Lever Ltd (HLL), the largest MNC in India, with a turnover of over Rs 8000 crore, and a long stint in the country, has been under a cloud several times. In terms of profit and capital gains, it is a much sought after company by investors. And it is a highly professional company. Yet all these did not prevent the company from taking to dubious practices. It was once hauled up before the Monopolies and Restrictive Trade Practices Commission (MRTPC) for receiving security deposits and showing them as “advances” to avoid paying interest.

There was the celebrated case between HLL and Fena over detergent advertisement. Fena thought that the claim of “lemon power” by HLL was bogus. The Securities and Exchange Board of India slammed HLL for “abhorent” corporate governance by acting against the activities of ordinary shareholders in the Brook Bond insider trading case.

Foreign banks play a key role in this country in setting trends for the banking industry. One of their major activities is to promote consumerism. They have taken the initiative in hiking the prime lending rate. They charge exorbitant rates for handling exports. A Reserve Bank of India survey says foreign banks have secured the maximum benefits in the post-reform period. While the foreign banks want to reduce interest paid to depositors, the MNCs want interest on loans reduced. In both cases, it helps to enhance the profits.

MNCs invariably keep their accounts with foreign banks. Banks encourage consumerism and provide capital for expansion. As a result, consumerism is fast spreading in India, including rural India.

The advent of MNCs in the metropolitan cities, as also in Bangalore and Hyderabad, heralded the steep rise in property values and rentals. Office space became so costly that it was comparable to New York rates.

National corporations generally invested in traditional industries. MNCs went for the non-traditional. So, when the recession came, the NCs were the worst affected. The MNCs are in fast moving consumer goods.

So they earned better prices and held up the shareholder value. Net profits of NCs rose by less than 2 per cent but of MNCs by more than 30 per cent. MNCs have a greater regard for shareholder interests. Both dividends and capital gains are higher. Thus, in many cases, apart from profit, the share value went up by 77 per cent. NCs never cared for shareholder. So the value of shares fell by 16 per cent (all 1998 figures).

There were several other episodes of importance. Once the MRTPC had to tell some of the US soda ash companies to stop forming cartels. American companies follow different standards. For example, they adopt the worst Indian standards. Only under compulsion did MNCs appoint Indians to higher positions.

European shrimp firms formed a cartel to ban imports from India. As people all over the West have reduced consumption of hard liquor, there is an effort to dump whisky in India. And, as tobacco and cigarette consumption in the West has gone down, American and other tobacco and cigarette companies have shifted their focus to Asia. Drugs, which are banned in the West, are being marketed in the developing countries, including India. As there is increasing opposition to the disposal of toxic wastes in the West, they are being disposed of in Africa and Asia.

Of course, there are blatant cases of cheating. Thus there was the case of an American who cheated VSNL of Rs 350 crore. It is a well known fact that many of the defective products, unsold in the West, are dumped in India. For example, defective steel and tin plates.

There is no accountability among MNCs. The Managing Director of Boehringer Manheim (India) Paul Stinson fled India for fear of prosecution for his alleged involvement in the production of contaminated medicines at the company’s factory in Pune.

The point I want to make is this: It is a bad record. The MNCs do not seem to be inspired by a sense of equality and fair play. They are here for profit. They are least bothered about social obligations. Do we then surrender our sovereignty or uphold it? There can be no two answers to this question.