Just as I had blogged this, the Nirav Modi story broke. Do not be fooled into demonising just him and rationalising such practices as being only at the margins.
A significant proportion of the stalled projects with non-performing loans involves big name promoters who took loans after bagging large contracts, diverted the money elsewhere, and then conveniently blamed everything from government lethargy to world economic weakness for their failure to repay the loans.
Here are two more examples of the malaise with corporate India.
Ananth points to this article which highlights how Indian pulse importers are reneging on contracts entered into with sellers from Myanmar, Tanzania, and Mozambique, following the sharp collapse in pulse prices after the bumper crop of 2016-17. This is the most detestable of business practices,
Sellers complained that many buyers here deliberately chose not to accept the shipping documents on arrival of the cargo. To be sure, most of the import business in pulses is done on CAD (cash against documents) terms; and often, the seller finds himself at the mercy of the buyer when the cargo reaches the destination port... default of international contracts sully the image of the country and bring disrepute to the trade.
Funnily, or expectedly, the author of the article gave this example of corporate misdemeanour the populist spin of a policy failure by the government in (believe it or not) effectively regulating private contracts!
One of the points made in a completely different context (and as a positive reference) by Nilesh Shah about the openness of corporate India to foreign investors is disturbing,
India is the only country in the world where in the listed segment, the largest bank, the largest insurance company, the largest mortgage company, the largest FMCG company, the largest telecom company, the largest automobile company etc are majority-owned by foreigners.
This is a very surprising development for a country like India, especially given the past two decades of economic growth. Have the foreign investment and financial market deregulation gone too far? Or is corporate India again failing India? Or is it that the Indian government is so weak and apathetic compared to its peers that it has failed to help its corporates stand up on their feet and fight off foreign investors?
I am inclined to argue that while the first
is less likely and the and the second are more likely the proximate causes, the mainstream narrative is likely to be characterised in terms of the third!