Ever since the license Raj was dismantled by former Prime Minister Manmohan Singh in 1990, India's economy has enjoyed a very high rate of growth. The removal of bureaucratic restrictions on the establishment of new businesses unleashed the entrepreneurial energies of the people of India. Many small businesses were set up during this period, including hotels, factories, and schools. Many of these businesses have, in the last 3 decades, grown into large conglomerates, with interests in multiple sectors. Yet, despite India's spectacular economic success being down entirely to the efforts of Indian entrepreneurs, the falsehood has been circulated that the high rate of growth was due to foreign direct investment (FDI) and the influx of foreign companies setting up new businesses.
There is little evidence to back up this claim and it is an insult to the efforts of millions of small entrepreneurs who took on personal liabilities in the form of term loans from banks at high rates of interest, who worked hard to create and sustain their businesses and who filled the gap which the existing state-owned companies had been unable to service. It is true that there was a lot of FDI and lot of foreign companies opened branches or other establishments. However, their contribution to India's growth pales by comparison to the indigenous efforts.
Much of the FDI from Western countries was in sectors which did not really contribute much to India's growth, such as real estate, finance, and telecommunications. Very little of it led to any technology transfer, which is supposed to be one of the benefits of FDI. The truth is that the benefit of FDI has always been exaggerated. Most of the countries in Asia which have enjoyed spectacular economic growth and industrialised within a matter of decades did so on the back of their own efforts, rather than through FDI. Countries such as Japan, South Korea, Taiwan and now China have relied largely on domestic entrepreneurship, public investment by state-owned companies and bodies, and a high savings rate, as well as protective tariffs for domestic industries.
The myth of free trade and FDI has been championed by Western neo-imperialists as a way of capturing rents from growth markets such as India. This is why immense lobbying efforts have been expended by Western institutions and their agents to persuade India to open up the multi-brand retail, finance and legal sectors to FDI. This is because Western countries have built up competitive advantages in these sectors. However, opening up multi-brand retail to FDI in India would be catastrophic to the livelihoods of the millions of kirana store-owners – those hard-working entrepreneurs who continue to serve localities throughout India and who probably offer better service than any Western supermarket chain could achieve. The same applies to the legal sector, which in India provides livelihood to tens of thousands of advocates. Opening up finance would spell disaster for India because one only has to remember the Western financial crisis of 2008-09 and how it bankrupted Western economies and their governments. India was able to weather this crisis largely because its banks were state-owned and tightly regulated by the RBI.
Despite lecturing India about free trade and FDI for decades, the Western countries have now turned their back on these very principles. The election of Trump in America and the Brexit vote in Britain demonstrate the hypocrisy of these two countries which have been the most strident advocates of free trade and opening up markets for their corporations. Both events were the result of a growing sentiment of hatred against immigrants in both America and Britain. Brexit was not really a vote to leave the EU as much as it was a vote to restrict immigration to the UK (including preventing Indian students who study in UK universities from obtaining jobs in the UK). The same applies to Trump who has vowed to prevent American companies from investing abroad and wants to end the visa regime which allows Indian IT professionals to work in the US.
The rising racism in the UK and US, with an Indian IT professional murdered by American racists just last month, demonstrates the hollowness of the free trade and FDI slogans. The purpose of these slogans is in reality to fool the people of India, especially the elite, in order to pave the way for an economic takeover of India and the impoverishment of the very entrepreneurs who have brought about India's high growth rates. It is shocking that India tolerated as RBI governor a man who was an academic from Western institutions (Raghuram Rajan). This man kept interest rates extremely high, leading to disaster for many Indian entrepreneurs. It is people like him who are co-opted by Western imperialism to enact policies and regimes which may be inimical to India but which are friendly to foreign interests.
If Modi really is a true nationalist, he should stop bending over backwards to please the US and UK and becoming their pawn to contain China. He should learn from the experience of Pakistan, which, by becoming the imperialists' pawn to bring down the USSR, has ended up in total disaster with no end in sight to the violence and disorder. Modi should establish good relations between India and other developing countries, such as China, Southeast Asia and the Middle East, and avoid the trap which Western countries are laying for India by getting it to become aggressive towards China. In addition, he should resist the lure of slogans such as FDI which could end up causing serious harm to the very voters who voted him into power.