Condemn the anti-social and anti-national policy of opening all doors to foreign capital!

Statement of the Central Committee of Communist Ghadar Party of India, 25th June, 2016

The latest policy changes announced by the Narendra Modi government regarding foreign direct investment (FDI) have opened the doors wider than ever before for foreign capital to rapidly penetrate India’s industry, services, agricultural trade, finance and weapons supply to the armed forces.

Statement of the Central Committee of Communist Ghadar Party of India, 25th June, 2016

The latest policy changes announced by the Narendra Modi government regarding foreign direct investment (FDI) have opened the doors wider than ever before for foreign capital to rapidly penetrate India’s industry, services, agricultural trade, finance and weapons supply to the armed forces. 

The previous Congress Party-led UPA Government had opened up various sectors to foreign capital including mobile telephone industry, automobile manufacturing, power generation and BPO services. There was a boom in FDI inflows from US$ 8.9 billion (Rs. 35,000 crore) in 2005-06 to US$ 40 billion (Rs. 1,80,000 crore) in 2008-09.  Foreign direct investments declined as a result of the global crisis, falling to US$25 billion in 2010-11. 

After the Modi government assumed charge in 2014, the very first budget session witnessed the announcement of policy measures to raise the limits of foreign ownership in selected sectors including defence production and insurance.  There was a recovery in FDI inflows during 2014-15, to about US$ 35 billion.  The recent policy changes are expected to lead to a quantum jump in foreign direct investments in the coming years.

These policy changes permit foreign companies to enjoy 100% ownership of enterprises in a wide range of sectors including production for the armed forces, civil air transport, animal husbandry, trading of food produced in the country, private security services and broadcasting carriage services.  Up to 74% foreign ownership (against the previous 49%) in brownfield pharmaceutical industry and airport projects will no longer require government approval; they have been brought under the automatic approval route.

Until now, the policy on foreign capital investment had various conditions attached, such as the condition that a foreign company operating in the country needs to purchase at least a certain prescribed proportion of its input requirements from within India.  This condition was aimed at ensuring that foreign investment has a significant multiplier effect on domestic economic activity.  Foreign investment in production for Defence had a condition that such projects must transfer the technology over time to the Indian partner.  Now both these conditions have been removed.  For the sake of achieving a flood of foreign capital inflow, considerations of self-reliance and benefits to the national economy have been trampled in the mud.


Opening all doors to foreign capital has not contributed to solving the problems of the economy of any country. On the contrary, it invariably leads to extremely imbalanced and lopsided growth, with capital flowing to wherever maximum profits can be reaped, and not necessarily where there is greatest need for investment to address the growing needs of the population. 

In our country, foreign capital is being invested to produce weapons, automobiles, run airlines, banks, insurance and giant trading companies.  Will foreign capital be invested to produce more dal, more milk, eggs and meat which the growing working class and school going youth of our country need?   No, it will not because producing and selling food at affordable prices does not guarantee maximum profits. 

Rapid growth in foreign investment, as we have witnessed earlier, will lead to more rapid concentration of capital and higher degree of monopoly power in the hands of the biggest private profiteers. It will lead to wholesale destruction of livelihoods of peasants and other small producers.  It will also accelerate the destruction of the natural environment. 

Permitting foreign ownership and control of vital parts of the means of social production and our military supplies means to give foreign capitalists the power to influence the course of our economy and government policy.  The degree of influence cannot be judged merely by the quantity of foreign capital in relation to total capital in the country.  By gaining control over a few vital sectors, foreign capital can exert considerable influence.  Past experience shows how the World Bank and IMF influenced policy making in India, even though the total loans advanced by them was a very small proportion of the total debt of the Indian State. 

Experience in recent decades shows how foreign capital curtails national sovereignty through various mechanisms at this time.  The bilateral investment promotion and protection agreements are one such mechanism.  India has signed such agreements with 82 countries since 1994.  These agreements violate the right of the Indian State to apply the law equally to all investors in the country, Indian and foreign. The result is that foreign multinational companies have repeatedly dragged the Government of India to international arbitration tribunals.  Such tribunals are set up by the World Bank and biased towards protecting the interests and claims of capitalist investors over the sovereignty of the states in whose territory they invest.

Fraudulent justifications 

Finance Minister Jaitley keeps repeating the argument that there is such an acute “capital shortage” in the country that attracting foreign capital is the only way for the Indian economy to develop.  Prime Minister Modi keeps repeating the claim that foreign capital will create many good jobs for Indian youth.

An important fact which Finance Minister Jaitley conveniently ignores is that Indian monopoly capitalists, who are engaged in a race with the monopoly capitalists of other countries, are exporting enormous amounts of capital.   Every year, Indian multinational companies are taking out enormous amounts of the profits extracted from Indian labour and investing abroad to exploit the labour of others. 

As on 31st March 2013, the RBI estimated the accumulated stock of Indian direct investment abroad at US$ 120 billion (about Rs. 6 lac crore), which was more than half the accumulated stock of foreign direct investment in India.  Annual Indian direct investments abroad grew by 10 times in four years starting 2004/05, to reach a peak of almost US$20 billion in 2008/09.  They declined following the global crisis and started to grow again in 2014.

If capital shortage was really such a major constraint, the Government of India ought not to be permitting massive export of capital by Indian companies.  Hence the Finance Minister’s argument is not credible. 

The Prime Minister’s claim that foreign investments will create many good jobs for Indian youth is also not a credible justification. 

Firstly, jobs created by foreign capital come with high uncertainty and risk, and the impact on employment over time could even be negative.  When foreign capital is invested to produce commodities for foreign markets, the jobs which are created are subject to global market risk; that is, whenever there is a downturn in global demand many jobs get destroyed in export oriented sectors, as has been happening in our country in recent years. When foreign capital is invested to produce commodities for the Indian market, the typically large-scale new enterprise will displace many smaller domestic producers; hence for every new job being created, there is an unknown number of old jobs and livelihoods being destroyed. For example, the Nokia plant in Chennai was shut down in November 2014 throwing more than 30,000 workers out of work, because it served the interests of the company’s drive for maximum profits.

Secondly, with the government eager to improve the “ease of doing business” for capitalist investors, labour standards are being lowered.  Laws which protect labour rights are being weakened or waived altogether.  Hence the new jobs being created by foreign capital are not really “good jobs”.  They are jobs at extremely onerous and super-exploitative conditions, with little or no legal protection of workers’ rights.

What is really the reason underlying the policy of attracting foreign capital investments at any cost?  The reason is that Indian monopoly houses view foreign capital as a factor that can accelerate their own growth and act as a springboard for their global expansion at this time. By expanding access of foreign capital to various lucrative markets in our country, Indian capitalists hope to gain access to foreign markets. They want to keep taking out massive amounts of capital every year to invest abroad, and want massive amounts of foreign capital to steadily flow into the country every year.


Opening up to foreign capital is not being done to either address a capital shortage or to create good jobs.  It is being done to satisfy the unlimited greed and imperialist aims of the monopoly capitalists.  It is anti-worker, anti-peasant, anti-social and anti-national.

Communist Ghadar Party calls on the working class and people to oppose the dangerous course along which the monopoly capitalists are dragging our country.  Let us in one voice demand:

Immediate halt and reversal of the process of opening up to foreign capital!

Immediate halt to Indian companies taking out capital in pursuit of private profits abroad!

The wealth we workers and peasants create must be deployed to secure our well-being!

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