The Indosphere
Made outside India
As growth slows and reforms falter, economic activity is shifting out of India
Aug 10th 2013
INDIA’S diaspora of 25m people .......In colonial times Indian labourers and traders spread across the world....A second wave of Indians left between the 1970s and mid-1990s, when the economy was in a semi-socialist rut........
Yet alongside this distant diaspora, a network of people and places is more directly engaged with India’s economy..... At the network’s core, however, is ....
offshore hubs, including Dubai and
Singapore,often with sizeable Indian populations and with their own economic strengths.
The idea that some things are better done abroad is hardly new........but India’s big offshore hubs are more in fashion than ever. They present
a mirror image of India’s red tape, weak infrastructure and graft. .... More than 40% of long-haul journeys from India go via a non-Indian hub, often in the Gulf......
few foreign airlines want to make them their base......
Indians go to Dubai to avoid taxes at home and because they trust its certification and inspection regime......
“Who’s Who” of Indian tycoons has a presence. Dubai is gaining traction in finance, too. .....
Colombo is a vital port. About 30% of containers bound for India go via intermediate hubs fed by small vessels, either because
big shipping lines do not want to deal with India’s customs regime or because their ships are too big for the country’s ports...........The project was funded by a Chinese firm probably too polite to admit that its investment is partly based on the idea that
India’s ports will never be world-class.........
The
largest hub for Indian trade is probably Singapore.....Reflecting this, the global exposure to India of Citigroup and Standard Chartered, the two foreign banks busiest in India, is 1.9 times the size of their regulated Indian bank subsidiaries.
Fund managers running money in India are often based in Singapore. ......Investors and firms
do not like India’s fiddly rules and worry that the country may tighten capital controls if its currency falls too far......
Indian e-commerce firms often get their data crunched in Singapore,.........bandwidth costs less, technology is better and you avoid
India’s headaches—such as finding somewhere to work, coping with state-run telecoms firms and having to wait to import hardware.
Singapore is also a centre for legal services. International
deals involving India often contain clauses which state that disputes be arbitrated outside India, with its clogged courts. Singapore, along with London and Paris, has become the preferred jurisdiction......
In the real world, however, the question is whether
activity is leaving India as its prospects have dimmed. A lead indicator is the purchase of gold by Indians—a form of capital flight. Gold imports have hit $50 billion a year, almost offsetting the boost the balance of payments gets from remittances from Indians abroad............
The biggest worry is that heavy industry is getting itchy feet.
Coal India, a state-owned mining monopoly sitting on some of the world’s biggest reserves,
plans to spend billions of dollars buying mines abroad—red tape and political squabbles mean it is too difficult to expand production at home.
Some fear manufacturing is drifting offshore.
In the five years to March 2012, for every dollar of direct foreign investment in Indian manufacturing, Indian firms invested 65 cents in manufacturing abroad.......
http://www.economist.com/news/inter...omic-activity-shifting-out-india-made-outside
