When I left India in July 1990 on an Air India flight as a younger man of 21 to study in the United States, the national and flagship airline served a drink unavailable in Indian stores: Coca Cola.
22 years later, I am in India as an Indian-American having worked for the United States government in Washington, D.C., most of my working life thus far, unlike most Indian-Americans. Air India is now bankrupt and Coca Cola is reportedly investing $2 billion in India.
Many take Coke for granted in the hooplah over other major multinationals such as International Business Machines (IBM) and General Electric Corporation (GE) which are more technically oriented. Coke’s story is the most successful local-global model of globalization and brand management though a far less glamorous story: the formula is as secretive as US nuclear codes. Its global operations bottle the syrup creating local jobs and consumption around the world, from small villages where no other corporation, including banks, dare tread to the mega cities of the planet where most people reside.
The US multinational was forced to leave India in 1977 because it refused to reveal its cherished formula concocted by its Atlanta, Georgia pharmacist founder, John Pemberton, in 1886 to operate in the Indian market. The law that was applied by India was the Foreign Exchange Regulation Act (FERA).
Today, Indian law is more flexible than ever before to accommodate US dollars, but the pendulum may be swinging too far in the other direction increasing the risks for India from MNCs other than Coke (a local consumption company), such as IBM, Accenture, Microsoft and Oracle, where most high paying jobs in services are being created to absorb India’s vast English speaking human capital for consumption in the United States.
The foreign direct investment debate is once again, therefore, at the forefront in Indian politics. India, contrary to 1977, cherishes its foreign exchange but foreign institutional investors (FIIs) are not as enthused because of the rising backlash in America against US dollars flowing out more than staying in.
The United States, to grow, needs the more open Indian market, especially as the protectionist China is expected to rise to the status of the #1 economy by 2016. India, however, is not as open to accommodate the American urgency because its local consumption is protected to promote Indian companies which would rather sell more in America and Europe than in India.
Open market American protectionism used to be secured by its more competitive innovation which is no longer the case. India, apathetic to innovation, is, therefore, the desirable consumption sink for the G8.
With US, EU, Japan, Russia and China all competing for the Indian market where the country’s government is permitting the co-existence of foreign firms and local public and private corporations to stimulate Indian innovation without the more stringent Chinese demands for intellectual property (India’s approach in 1977 with Coca Cola), on balance, the risks for India to lose its market to foreigners are higher than India reversing course as in 1977 because its young and restless, the third generation coming to age after 1947, are getting used to the good life which FDI brings without having to emigrate. In fact, India is actively pursuing such a policy as publicly articulated recently by telecommunications minister Kapil Sibal and US Secretary of State Hillary Clinton.
The leverage in US-India trade to manage China is with America. India risks becoming the Asian mistress of the United States to deal with tensions in its long term marriage with China.
All that it takes to bring India into open market compliance for the purpose of significantly raising its domestic consumption and improving its god-awful mess of an infrastructure, an albatross around India’s growth prospects, is a whip lash in revenge by America for 1977: threaten to or withdraw FDI dollars only to flood India in short order to take control of India’s economy for bringing it into order with the rest of Eurasia.
Else, when the music stops, China would be the last man standing in the geopolitical cowboy shootout, having first attacked the US economy, and then the US pulling out of India in social recoil, the EU stuck in a mess.
World’s democracies, many created after World War II by the victorious allies, could stand to lose if unprepared, notwithstanding Mayan superstitions, beginning 2012.