An Attack on India's Sovereignty


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The Foreign Loot


At the turn of the last century, Romesh Chander Dutt and Dadabhai Narowjee brought before the Indian people how the British Colonialists were looting our country. Pictured poetically, they said that water that evaporates from the Indian soil forms clouds that are blown away to precipitate on British soil, leaving India parched, but Britain blooming. Half a century ago, Rajni Palme Dutt, in his masterpiece, India Today, further elaborated how the British robbed India through the last century till 1947. Later, Suniti Kumar Ghosh has brought this out more lucidly in his book ‘India and the Raj 1919-1947’.

When India turned to a semi-colony in the post-1947 period, while all political and social formations, including the bankrupt CPI & CPM, hailed the fake independence, it was only the CPI (ML), after the Naxalbari uprising of 1967 that brought before the people of our country the true nature of neo-colonial exploitation and control in the post-1947 India.

But, what till 1990 had been subtle, has now, in the era of globalisation, burst forth with a crudity and naked aggressiveness which none can hide. The sovereignty of the country is being blatantly subverted, on a scale far more than existed in the earlier four decades; and the foreign loot has reached astronomical proportions — and is continuously growing at a phenomenal rate. And the more severe the imperialist crisis the more desperate is their desire to loot the backward countries like India. Each Round of the WTO helps them extract billions more.

In this decade of globalisation the extent of the imperialist loot would have increased five to ten-fold. The extent of open banditry today, in this so-called free India, would make even the Dutts and Nawrojees turn in their graves. Could they even imagine that the fruits of the freedom struggle would lead to such a pathetic state of humiliation and slavery once again? Bhagat Singh and his associates went to the gallows with a smile on their face and the prison dungeons resounded with the slogan ‘Inquilab Zindabad’. Today, he may be glamourised on the screen, but has been treacherously betrayed in real life. What was done openly by the foreign rulers then, is now being done by so-called Indians through devious and underhand means.

Today, it may be more difficult to accurately picture the true extent of the foreign loot, as unlike during the colonial period, much of the present loot is hidden, with the country being robbed by these thieves — i.e. the foreign robber barons and their Indian collaborators. Yet, we shall here try and give some estimation. This will, no doubt, be only an approximation, but will, at least give some indication of the magnitude of its impact on the country, its economy and its one billion people. It will also give an indication of the seriousness of the problem and the urgency for change.

The major source of drain of wealth is of two types — visible earnings and the invisible loot.

The major source of visible earnings by the imperialists comes from three basic areas:

(i) Interest on the foreign debt

(ii) Income (i.e. Dividend, Royalties, technical fees, etc.) on FDI invested in the country.

(iii) Returns on the financial markets i.e. on FIIs, GDRs, Eurobonds etc.

Of course, in addition to these, there are technical collaborations, which do not involve capital investment, yet give returns. Also there are the fat salaries paid to expatriate directors, managers, technicians which too is difficult to estimate. Here we shall just do a rough calculation of the above three major sources of drain.

The foreign debt, after the continuous spate of devaluations, would roughly be Rs 4,90,000 crores. If we calculate interest at the conservative rate of 4% the foreign drain due to interest on this debt would amount to Rs 20,000 crores ($4 billion). If to this is added the NRI deposits of roughly $8 billion that has been given huge rates of interest varying from 12% to 15%, with the full right of repatriation, there is a further outflow of about $1bilion yearly.

The income on FDIs: According to commerce minister Murasoli Maran, investments in collaborations since 1981 alone have amounted to $38 billion; if, to this, we add investments in direct subsidiaries .... at a very conservative figure it could be $12 billion... the total comes to roughly $50 billion. Add to this roughly $10 billion invested prior to 1981and another $20 billion of FDI invested in the last 5 years (including re-investments), the total comes to roughly $80 billion. If we calculate a return on this investment at 16% — which is the minimum rate guaranteed to Enron by the Indian government — the yearly return works out to $13 billion or Rs 64,000 crores. The return is likely to be much higher, when we consider that the US claimed they lost $450 million (Rs 1,800 crores) in just one year on royalties in the pharmaceutical sector, because India had not changed its patent laws. Also, if we consider Maruti, with only a 50% stake, repatriated a huge Rs 285 crores in ten years, on an investment of Rs 103 crores.... i.e. a yearly return at the rate of 28%. And what was guaranteed to Enron was the minimum; most TNCs operating in India make far more than this ‘minimum’.

Now if we turn to the financial sector: the FII quantum was $14.5 billion and GDR / Eurobonds was $ 8.7 billion. The return on FIIs is very high (mostly speculative profits) and has been suggested by some economists at about 20%, while income of GDRs come from dividends and would roughly be, say, 10%. So the total outflow from these (FIIs + GDRs) sources comes to roughly $4 billion or Rs 19,000 crores.

Thus at a rough calculation, the total outflow from these three sources alone amounts to $22 billion (Rs 1 lakh crores).

Besides this, there is an enormous ‘invisible’ flight of capital from the country.

First let us look at the trade front. In 1995 studies by three American economists of India’s trade with the US, indicated that the total figure of capital flight from India via this particular route (trade) amounted to between $15 and $20 billion yearly — in today’s terms that would mean $20 to $25 billion. Two major methods of such extraction are: (i) through highly unfavourable terms of trade and (ii) by under-invoicing and over-invoicing of exports and imports. The terms of trade continue to go against India due to the continuous devaluation of the rupee. With each devaluation the Americans have to pay less dollars for what India exports them, and India has to pay more dollars for what it imports. In the second method TNCs operating in India resort to over and under invoicing as a method of transferring dollars (and profits) to their parent company abroad. So, for example, Coca Cola, could import its concentrate from it parent company at say $1000 a litre, instead of the $10 that it may actually cost. Thereby not only are dollars transferred to America, but also the profit, as the parent company makes a bumper sale on its concentrate to India, while the Indian company has to make big payments for what costs next to nothing, thereby making losses. Here, Coca Cola resorts to over-invoicing. Similarly with companies exporting to their parent company, they resort to under-invoicing. If by such means only the US gains say $20 billion (to use the lower figure), if one includes Europe and Japan the figure would be much higher, as the US accounts for only a third of India’s foreign trade. At a conservative estimate India would be losing through this route roughly $30 billion a year. With such windfall gains, it is no wonder that the WTO is aggressively breaking down trade barriers!!

Next, if we look at India’s Brain Drain, here too the loss to the country is enormous, and takes varied forms. First, the Human Development Report of the UNDP (2000) estimated that India loses $2 billion every year by providing cheap university education to professionals who migrate. This does not, ofcourse, include the vast amount of goods and services outsourced to India itself, utilizing the cheap labour. So, for example, of the $10 billion IT exports, more and more is being outsourced to India in recent years. Through such transfers India loses a minimum of $3 billion each year. Now, if one turns to the sphere of research and bioinformatics, once again the loss is huge. In 1996 the Gene Campaign estimated that the US economy gained over $70 billion from "gene imports". Not only has India lost the $700 million yearly in bioinformatics, whose entire gain goes to the US, but also the latter’s attempts patenting of all sorts of Indian produce like Basmati, neem , tumeric and tens of other Indian natural products. So, of the estimate by the Gene Campaign a good part will come from India. Even if we take a nominal loss of over $1 billion the total lost through these means would be another $2 billion. So, the total yearly loss through the Brain Drain would be to the order of $7 billion.

Then there are the huge sums of money that leave the country illegally seeking tax havens like Switzerland. The IMF has estimated that wealthy Indians have stashed $100 billion in foreign accounts. This is likely to be a gross understatement as the kickbacks alone on defense, at say 5%, would be to the order of $0.6 billion per year. Anyhow, assuming that this amount left the country chiefly in the last three decades, with greater amounts leaving in the liberalized era, it would mean roughly $5 billion leave the country through this route.

Then over and above this there are the other sundry methods of loot, which are difficult to even estimate, unless some serious study is done. There are, for example, the huge salaries paid to foreign technicians and expatriate directors of companies; amounts lost through the cheap sale of assets of PSUs to the TNCs; and numerous other sources of extraction of the country’s wealth.

Now, if we total these figures (Table IX.1) we will get a rough picture of the total yearly loot from the country:

Table IX.1

Source of the Loot Amount in $ Billions

Returns on Accumulated FDI in the Country.......


Returns on FIIs an GDRs.........................................


Interest on Foreign Debt and NRI deposits.........


Loss through Foreign Trade...................................


Brain Drain.................................................................


Yearly flow of illegal money abroad.......................




Total flow of Money abroad each year from India


In other words the country is losing roughly $65 billion each year to the imperialists. This gigantic figure amounts to Rs 3 lakh crores (or Rs 3,000 arab), which is 20% of the country’s yearly National Income. Is it at all possible for any country, least of all an underdeveloped one like India, to develop with such a huge drain on its wealth each year? Unless this is stopped there is no possibility whatsoever of our country’s development!!




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