India is known as the graveyard for investors. I am talking about foreign companies that want to setup production inside India. Historically, a long list of companies came to India, setup shop, then had to leave with their tails tucked between their legs. In addition to the well known lack of infrastructure and the cumbersome bureaucracy, the country regularly pass laws retroactive in a way to shake down companies already inside India. This has become a way for the government to get part of its revenue. Local companies often find ways to strip foreign companies of their assets with the help of the Indian government. On the other hand, companies that went to China have prospered. Today, GM earns more money from China than from the U.S. I am sure the Chinese learned from Western companies and set up competition against their former teachers, and government push foreign companies to setup domestic supply chains for more of their parts, but at least the Chinese never fine the foreign companies based on retroactive laws passed at a later date and the foreign companies made huge amount of money from China. Western companies left China because they were outcompeted by the domestic counterparts in the market place.
Instead of changing the landscape so more foreign companies will invest in India based on profit, Modi sees this war as a way to get some Western companies to invest in India based on geopolitical reason. The rationale is, India wins the war, at least based on India and Western media, then the U.S., seeing India as a useful counterweight against China, will push more Western companies to invest in India on political grounds, despite all the horrible record of previous investors. Instead of doing the hard work of fixing the investment environment, Modi wants to get investors through the U.S. government applying pressure to our companies.
Well, India did not win. In fact, they were soundly defeated. Going forward, not only Pakistan, but other South Asian countries like Bangladesh and Nepal will be able to stand their ground against the Indian military with the help of China. India has lost its value as a counterweight against China. You can see glimpses of this by seeing that this year, India was not invited to the G7 nations meeting In Canada. India featured prominently in this meeting in recent years. Trump said that he does not want Apple to build their assembly plant in India. What previous push by Western government based on geopolitical calculus for their companies to invest in India will now cease. Modi thought he saw an opportunity to grab business from Western companies has done the opposite for India.
Will be interesting to see how the Indian economy fare in the coming years with this backdrop.