India, which boasts indigenous rocket and satellite launchers, inter-continental ballistic missiles with nuclear warhead carrying capability and the world’s third largest cell phone market, is largely import dependant for micro-chips; phones and batteries; high-end consumer electronics; home and office furnishings; perfumes and toiletries; processed foods; leather products; sports accessories; auto engines, components and accessories; automotive tyres; audio and video equipment; cold-rolled sheets; non-ferrous metals; elevators; aero-bridges and what-have-you. Imagine, a billion-dollar international airport modernization project executed by a public sector undertaking has failed to become operational as arrival of aero-bridges from Indonesia failed to arrive in time!

So neglected is the country’s industrial sector, even two decades after it started the IMF-World Bank designed economic reform, that the industry’s share of India’s GDP is only around 29 per cent as against China’s 47 per cent. Industry, having a strong export focus, is the most important growth driver of the world’s second largest economy. Ideally, India’s industrial sector should make up for 60 per cent of its GDP for next several years to catch up with such fast emerging Asian economies as China, South Korea and Indonesia.

The services sector share of China’s GDP is 43 percent, catering largely to its trillion-dollar-plus export trade providing shipping, in-land transportation and insurance to massive export finance. India’s services sector comprises as much as 54 per cent of its GDP. The lopsided economic policy partly strangulated India’s industrial growth. Now, overseas control of the services sector will further strain the economy and its physical and financial resources.

The successive downgrading of Indian economy by global sovereign rating agencies and analysts has a lot to do with the growing weaknesses of the country’s industrial sector and its rising dependence on imports, leading to ever-expanding trade gap, high current account deficit and continuous rise in foreign borrowing. Additionally, foreign investment in services is, instead of easing pressure on the Reserve Bank’s foreign exchange reserves, posing a threat to India’s financial stability.

The control of the country’s stock market by 400-odd large and medium-sized foreign financial institutions, the expansion of foreign banks, external finance for imports, overseas general insurance control of imports, exports and shipping, foreign shipping and air transport are among the key contributors to the near-continuous slide of Indian rupee vis-à-vis other hard currencies. External rating agencies are now certain that India’s GDP growth will dip below six per cent in 2012-13.

The liberal FDI regime since 1992 helped multinational corporations (MNC) gobble up whatever good industry the local entrepreneurs built over the years – from manufacturing cement, non-ferrous metals, earth-movers, drugs, chemicals and pharmaceuticals, electrical equipment, refrigerators, air-conditioners, television sets, music systems, apparel and sportswear to even packaged drinking and aerated water. For instance, Ranbaxy, the country’s largest drug firm, no longer belongs to its original Indian promoters who built it brick by brick over the last three decades. The Japanese FDI has gobbled up Ranbaxy.

Similarly, FDIs have swallowed a large number of painstakingly built Indian cement units. Kelvinator and Allwyn – once leading Indian refrigerator brands - have long disappeared from the public memory. FDIs have chomped and chewed them. Godrej and Voltas have been doggedly trying to survive against FDI onslaught from Samsung, LG, Haier, Whirpool and Electrolux. Such FDIs do not necessarily strengthen the country’s industrial prowess.

The country’s latest export-import figures stare at the deficiency of the domestic industrial sector, especially manufacturing, India’s exports contracted for the fifth consecutive month in September while imports continued to surge through the first half of the current fiscal. The September trade deficit soared to over $18 billion – an 11-month high – taking the first-half (April-September) deficit to over $ 90 billion. Last month, export contracted by 10.8 per cent y-o-y to $23.7 billion while import rose by 5.1 per cent to $41.8 billion.

Both the government and local analysts projected a grim picture of the export trade in the coming months on such pet grounds as week global economy. However, the same theory does not seem to hold good for China, whose high September export data outsmarted all global forecasts. China’s exports have beaten the myth of western economic slow-down. The communist country’s strong domestic industrial sector and export-led economy, backed by its own well-oiled services network covering shipping, banking and general insurance, together made it happen.

India had championed the cause of a United Nations Code of Conduct for Liner Shipping in the 1970s recommending a 40:40:20 cargo sharing formula. The formula allowed a minimum 40 per cent sea cargo on domestic bottom and an equal share to shipping lines from trading partner countries, leaving the rest 20 per cent free for loading by all, including third country flag carriers. Sadly, India has long surrendered its shipping right to foreign lines.

Contrarily, China became the biggest beneficiary of the UN shipping code spearheaded by the late Mrs Indira Gandhi, India’s most practical visionary prime minister ever, nearly 40 years ago. She planned a massive domestic steel and ship building capacity up to of 75,000 DWT Panamax-type (capable of navigating through the Panama Canal) vessels to meet the future demands of domestic merchant marine trade. She also nationalized the general insurance industry and created a state-owned export-import bank for India (Exim Bank) in order to take a future lead in India’s foreign trade and services.

Unfortunately, the successive governments surrendered the advantage under strong MNC pressure, ruining India’s ambition to emerge as a major shipping and shipbuilding nation and a global player in general insurance. India also lost advantage in building deep seaports, constructing world-class containers and cross-country rail-road-port service facility linking its so-called nine major ports with industry heartlands. Even Sri Lanka boasts better deep sea port facility than India’s. Many large mother container vessels carrying international cargo for India anchor in Colombo and use lighterage (repeat lighterage) service to dispatch cargo to Indian ports.

Now, the grand opening of the services sector to FDI may permanently thwart the prospect of India becoming a strong and viable trading and maritime nation, backed by a strong industrial sector with lakhs of SMEs and ancillary units and its own globally-networked insurance and financial services firms. Paradoxically, those unleashing the FDI onslaught on India’s industry and selling its services sector to overseas predators today mostly had their grooming under Indira Gandhi who envisioned India as the 21st century’s Asian leader in agriculture, industry, trade, commerce and services. (IPA Service)