The author of the article raises some important points:
- There are other reasons to worry now about the India hype. It is all very well for Indians to express racial pride over the success of Mittal in gaining control of European Arcelor to become the world's biggest steelmaker. But why, it might be asked, has the Indian-born, London-dwelling Lakshmi Mittal invested so little in India itself? And where would India be if its markets were as open as those of Europe, an openness which enabled Mittal to buy Arcelor?
- The Tata Group's acquisition of the Anglo-Dutch steel group Corus raises other concerns. Maybe there are synergies and Tata can acquire technology. But, again, one may ask why Tata, a 100- year-old family conglomerate, is investing so heavily outside India when India offers the greatest growth potential of any major steel market. Its current steel output of 44 million tons is one-tenth that of China.
- Enthusiasm about India's global role as a manufacturer, given its supply of labor and vast domestic market, is fine in theory, but it must be tempered by the reality of high tariffs and a huge manufacturing trade deficit. India is more dependent than ever on exports of services and raw materials, and on workers' remittances.
Add to the above, a whole host of companies coming out with IPOs or issuing FCCBs (which will be converted into equity as some time in the future). Dilution of equity is happening with rapid pace even as companies hope to counter the same with higher profits. Well, someone please ask Indian sugar companies, how does it feel when there is no commensurate earnings growth on a diluted equity base? Will corporate India walk down a similar path?
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