Foreign Enterprise In India BRITISH COMMERCIAL STAKE STILL LARGE

Press, Volume XCVII, Issue 28748, 20 November 1958, Page 14

Foreign Enterprise In India BRITISH COMMERCIAL STAKE STILL LARGE

[By the Financial Editor oj the ‘Manchester Guardian.") (Reprinted by Arrangement) II

There are more British people today m Calcutta and the area served by its port than ever before. The value of British capital invested in India has more than doubled in the last 10 years, and a large part of it is in this region. In spite of substantial new investment of American, German. Italian, and other foreign capital the British share is still something like 80 per cent. And one is told everywhere, by both British and Indians, that of all foreigners the British are most liked and respected in India. All this is a little confusing to the visiting student, and the truth needs some sorting out. Some of the old British interests in India, like the tea properties, are steadily being sold oqt. The jute industry had largely been taken over by Indians before the war. The famous old British department stores have long been closed down. In other fields new investment has been coming in on a fair scale, almost entirely from British manufacturing companies. Firms like Imperial Chemicals. Dunlops. Guest Keen, Imperia] Tobacco. Tube Investments, and many smaller ones i have expanded partly by using retained profits and raising loans and capital in India, and partly by investing new money in their Indian businesses. British Investment

In banking, trading, and “managing agencies” the British stake is still considerable but declining; in the manufacture of chemicals. machinery, diesel engines, bicycles, and a large range of engineering products such as airconditioning plant and electrical apparatus, British firms are increasing their activities A recent estimate puts the total value of United Kingdom capital invested in India at over £3OO millions. Much of it is held in partnership with Indian business, and in any case a large proportion of Indian staff is employed up to the highest management posts. The Indian company of the 1.C.1., for example, has an Indian chairman.

Businessmen here are fond oi saying that in the second fiveyear plan, as in the first, the

“public sector” has not got within 75 per cent, of its target, while ‘he “private sector” has shot far ahead of expectations. That is true as far as it goes, and the push and vigour of private enterprise, both Indian and foreign, is impressive; but it has been able to expand rapidly with the help of inflationary profits and a strong general demand set up by the huge expenditure of the State. In this mixed economy business depends on government in a thousand ways. To mention an example, the Government wants to set up manufacture of coal tar and is negotiating with a German group about a plant; private industry wants to expand dyestuffs production but cannot go ahead until it knows whether enough coal tar will be available ano at what price Again, in the field of pharmaceutical products nothing new is being done because the Government is expected to accept the Russian scheme for a group of State-owned factories producing a wide range of pharmaceuticals Pressure for indianisation Foreign firms both profit from the Government-financed expansion and suffer from Government policies In many cases the pressure for rapid Indianisation of staff and management goes tar beyond what the firms regard as sound The few foreign managers or officials who are allowed to remain are said to be greatly overworked because able and experienced Indiankare hard to find in the numbers ' required The story that British businessmen in Calcutta still live on the ample scale of the Sahibs of old is greatly exaggerated The proof is thai n is difficult to induce good men from Europe to accept jobs in India Apart from the heavy responsibility thrown on a man who may have few. if any. colleagues of his own race to work with there is the bugbeat of fierce taxation the nigh cost of living, and the difficulty of making proper pension arrangements

Personal taxes are at least as high as at home are more complex and irritating, and are administered much more severely For several years now the Government has promised to make things easier for foreign managerial and other staff, but the only concession made so far is to exempt technical specialists from all income tax for periods up to three years That exemption ?s not often granted, and it tends to cause friction between the shorttime employees and those who have to stay and keep the business going. It also compels valuable experts to depart at the endof the tax holiday, whether or not their job is completed A sensible solution would be partial relief for all foreign employees, rather than complete exemption for some

The new “expenditure tax applies so fai only to men with net incomes (after al] other taxes) of £2700 a year, and various allowances bring the minimum up to at least £3OOO To put it differently: a gross income of £6OOO a year, if it is all spent, will not attract expenditure tax; the tax will take 0.23 per cent, of a total gross income of £7500 a year and 2.6. per cent of a gross income of £15.000 a year. But it is suspected that the rates will creep up once the tax is . ell established The same is said of the wealth tax. a small annual capital levy on individual net wealth of more than £15.000 Companies have to pay 4 per cent, a ycar wealth tax on their total assets “Friendly Attitude” These are only a few of the many aspects of Indian taxation that are resented by foreign persons and firms. Much more forbidding than the leva! of taxes is the administration, which leaves far less room for discretion than it does in Britain. The adverse effect of taxation on foreign investment is recognised at centre and a number of sensible proposals have been made fori modifying the most oppressive taxes and practices. But action takes time. Meanwhile foreigners feel that Indian taxes are unreasonable. and this feeling does as much to hamper foreign investment as the actual tax provisions.

On the other hand, the general intentions of the Government have become more friendly towards private enterprise, and foreign enterprise in particular. When the “Industrial Policy Statement” was issued in 1948 independence was new and Indians feared that the withdrawal of political power might be followed by economic penetration. It was also believed, not in India alone, that the post-war boom would be followed by a slump and that capital would be eagerly scanning the world for places to invest. Things have turned out differently. Today there is a seller’s market for capital, and many other countries offer easier and more profitable conditions for investment That is just as true of trained staff, both technical and managerial At a time when such people are scarce everywhere India will not get her share without offering attractive conditions. Partnerships In the last few years this has been gradually realised. In a series of policy statements Indian Ministers, including Mr Nehru, have declared that foreign capital will be welcomed and fairly treated. Nationalisation is no longer a live issue. Though one or two branches of business may still be taken over, there is no longer much doctrinaire interest in public ownership as such. Detailed proposals for tax concessions and other easements are being studied. If all goes well something may be done in the next year or two. It must not be thought that foreign businesses are obsessed with these difficulties. Many are content to be in India and ready to go on investing more capital here. Many of the British-Indian partnerships in industry are working out very well. A balance is gradually being established between the huge projects conceived and carried out by the Government and the scope left for private enterprise. British people are active on both sides, and one cannot help admiring the way they have entirely adapted themselves to working under an Indian Government and in partnership with Indian firms. They are still doing a job that no-one else could do.

(This is the concluding article of two dealing with India's economic development.)