The top 10 Indian companies which are cash surplus -- Economic Times illustration.
I fail to understand the economic rationale behind this glaring contradiction. A country, whose industry is sitting over a pile of cash, is desperately looking for foreign investments? Why?
There is hardly a day when you don't hear of the desperate need to build investor confidence. Open a TV channel and you will see the anchors repeating the line ad nauseam. They invite panelists who also speak the same language. All this impacts the politicians who also start parroting what the TV Channels keep on blaring.
India must bend backwards to bring in foreign investment. But is India really short of money? Don't we have money within the country to invest for our needs?
In 2012, the Reserve Bank of India had said that Indian Co's were sitting over a pile of cash, over Rs 9.3 lakh crore or $ 166 billion (Read my blog post Are a handful of Corporates holding the global economy to ransom? http://devinder-sharma.
The Economic Times on June 11, 2014 (BSE 500 companies like Sun Pharma, Wipro and others sit on a cash pile..http://bit.ly/1kOkY0t), tells us that at a time when the growth rate refuses to cross the hurdle, 126 Indian companies are sitting over surplus cash, I call it hoarding money, their surplus being more than their debt. This surplus is after all the investments these companies have made abroad. Among the top 10 cash rich companies were Wipro and Sun Pharma. The news report of course leaves some confusion when it says that the cash pile of 414 companies grew at a compound rate of 8.8 per cent over the last five years to Rs 5.2 lakh crores, this can't be correct considering that the surplus cash they carried in 2012 was Rs 9.3 lakh crore.
Nevertheless, what needs to be also known is that in the month of April 2014, Indian companies invested $ 5.4 billion abroad. In last April (2013), Indian Companies had invested more than $15 billion. Oh dear ! If this is true than why does India need to accept all the arm-twisting and tweaking of domestic laws to bring the foreign investment into the country? Why can't the Indian companies be made to invest in India? Don't they have some obligations towards the nation?
To say that the Indian companies have no avenues to invest is all bumkum. If that was true, then how come the foreign companies are exerting so much pressure to invest in India? If foreign companies can come and earn profits I fail to understand how Indian companies are unable to do so. So let us not try to unnecessarily defend the massive profiteering that is taking place among Indian companies. Let us therefore make it mandatory for Indian companies to first invest within the country. These companies make their profits within the country, and then are allowed to take the cash outside. In simple terms it means the Reserve Bank of India allows these companies to park their capital in safe havens. #