Three items in the November 28 edition of the Times of India caught my attention. First, Prof Nirmalya Kumar of London Business School argues that the global service delivery model developed in India allows even the most creative jobs to be moved to India provided the interfaces can be specified. He also was quoted to have said that India Inc need not build global brand as the market is really here and they should rather invest in product, ie, R&D. All this clearly means, inter alia, that there is tremendous scope for investment inward in India and not outward.

Second, Aditya Puri of HDFC Bank was quoted as saying, “I don’t believe in this policy paralysis business in the sense you can’t have 7.5% growth with policy paralysis. It is being overdone.” This means it is not really difficult to do business in India.

Third, India Inc bets big on investing abroad – says a caption. Export of capital worth Rs. 3 lakh crore occurred in the last 18 months. In last six months, it was $19 billion. Between August and September 2011, there has been a 51% increase. This is against a declining FDI inflow of only about $393 million this year so far against $29 billion in the previous year.

It would be interesting to note in this connection that in the 2010-11 fiscal, investment of  Indian companies in wholesale and retail trade overseas went up 78% as compared to the previous year – up from  $1,052 million in 2009-10 to $1,870 million in 2010-11. In agriculture too, Indian investment overseas increased from $940 million in 2009-10 to $1,200 million in 2010-11.

Further, in the context of the recent debate on FDI in retail, it must be remembered that India is currently the world’s largest milk producer, second-largest fruit and vegetable producer and third-largest grain producer. However, only some 5% of its produce is processed and up to 40% of its fruits and vegetables perish through spoilage, because of poor cold storage facilities and inefficient transport. The question therefore naturally arises as to why doesn’t India Inc. think instead of investing more in here in retail and agriculture?

The other question is whether all this export of capital detailed above is in national interest? When there is a crying need for investment in India as aforesaid and falling FDI inflow, should we allow such unfettered outflow of capital? Because all this investment creates income and employment abroad, depriving the home country. It is however possible that the business abroad would have considerable synergies with India like in terms of technological upgradation and taking advantage of favorable conditions in India with regard to manufacturing and out sourcing especially of raw materials or for resource exploitation for Indian operations.

But, take recent cases like Fortis’ in Singapore, GAIL’s in the US and Canada, GVK Power’s in Singapore and ETHL Communication Holdings’ and RHC Holdings’ in Mauritius. Or about $5 billion investment by about 10 Indian companies in Kizad, an Abu Dhabi govt owned industrial zone. Even Financial technologies, which runs the MCX commodity exchange, wants to run exchanges in Bahrain, Singapore and Africa.

One needs to know how many of the proposals have built in such positive linkages. Further, the scope and possibility of any outsourcing to host countries would over time get more and more limited. Thus time has come to review what benefit the home country derives from pursuing such overseas operation and this is more relevant in   the context of the need for FDI inward and the debate on outsourcing.