[Feb. 02, 2007]

On Wednesday, the Indian company Tata Steel won Corus for 12.1 billion dollars. It was one of the most important business acquisition for Indian industry.

The buyout arrived after a head-to-head bidding against Companhia Siderúrgica Nacional of Brazil. (Financial Times – Jan. 31, 2007).

Two firms from emerging countries were contending for an Anglo-Dutch Steel Company.

With this acquisition - after the 2005 merger between Mittal and the European Steel Company Arcelor - is clear Indian economy is taking on the Western marketplaces.

Mittal's son Aditya remarked: "This is an important milestone for India's globalisation and is a strong signal that Indian companies are ready to compete on a global arena" (The Times of India – Jan. 31, 2007)

India's economy is growing very fast, taking advantage - together with China - of globalized markets. According to Bloomberg, "India's economic growth unexpectedly accelerated to 9.2 percent last quarter, driven by government and consumer spending". (Bloomberg – Nov. 30, 2006)

The author Sanket Bhatia, in his work The Process of Liberalization in India: Foreign Direct Investment and the Indian Auto Industry, offers the reader a wide survey of economic changes occurring in the country after important liberal reforms.

Such reforms, introduced by Indian Government in early 90', opened India's market to Foreign Direct Investments (FDI), producing a fast boosting in economy, particularly in the automotive sector.

The increasing level of FDI reflected international confidence in Indian economy. Foreign investments, thus, led to better infrastructures, created jobs, introduced new technologies and known-how, modernizing Indian companies and – at the same time – exposing them to international competition.

FDI concerned most of all the auto industry, for - since its beginning - it started up as joint ventures with multinational firms. Tata Motors Ltd, for instance, started the production of trucks through a collaboration with Daimler-Benz of West Germany.

In the second half of twentieth century, Sanjay Gandhi – the son of the then Prime Minister, Indira Gandhi – built up the Maruti Limited with the intent to develop a "people's car". The company went into liquidation in 1977.

After Sanjay's death, Indira invited Suzuki from Japan to enter the Indian automobile industry as a minority stakeholder in Mauriti Udyog Limited, which produced the Indian famous car "Mauriti 800", based on an existing Suzuki model. It was the first step towards FDI in India's automobile industry.

In April 1995, once the licensing requirement for cars were abolished, the Government introduced easier conditions for Foreign Direct Investments, known as The Automobile Policy.

The author states that these conditions attracted many international players, "encouraging them to produce and source raw materials locally, thereby achieving technology and skill transfers into India."

10 years later, the automobile industry is the leading sector of what it's called Brand India. The Society of Indian Automobile Manufacturers (Siam) stated that in 2006 the industry was estimated to sell 1.131 million passenger vehicles in the domestic market. (Indian Times – Dec. 29, 2006)

Prime Minister Manmohan Singh told: "The success of the Indian automobile and auto components industry is a proud symbol of the success of Indian enterprises in this new era of globalisation. Brand India has now begun to make its mark on the world stage". (Times of India – Nov. 4, 2006)

Open markets and thereby FDI have risen the standards of living, of productivity, introduced the latest techniques and technologies, creating new jobs and new opportunities. But there's a flip side – as always: all these changes increase the gap between the haves and the have-nots.

According to Sanket Bhatia "foreign investment [...] has targeted specific regions (mostly urban), and produced goods and services for certain groups (city dwellers, middle-and high-income groups)", leaving behind rural regions and slum dwellers, creating new poverties and trigging crime rates in the major cities.

Inequity is as old as India itself, one may say, but philosopher Alain de Botton in his work "Status Anxiety" points out the mirage of social mobility as the real change in Indian society.

In de Botton's words: "It is perhaps as unlikely that we could rival the success of Bill Gates as that we could in the 17th century have become as powerful as a maharajah [...] Unfortunately, though, it no longer feels unlikely. Depending on the magazines one reads, it can in fact seem absurd that one hasn't already managed to have it all." (IHT – Jan. 25, 2007)

Therefore, according to filmmaker Raja Menon, what compounds the pain of falling behind is the disrespect of India's wealthy toward its less fortunate. That seems to be the most dangerous flipside - for many emerging countries.


For any further investigation, check its related articles:

Tata Steel wins Corus with £6.2bn offer on The Financial Times website

We couldn't buy Tata, they bought us: Corus on The Times of India website

India's Economic Growth Unexpectedly Quickens to 9.2% on Bloomberg website

Indian auto industry touches sky on Indiatimes website

'Brand India' powered by automobile industry: PM on Times of India website

Rising prosperity brings new fears to India on International Herlad Tribune website