Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster
Investing in India? Get Equitymaster Research  
No escape from political risk for India Inc? 
(Thu, 6 Dec Pre-Open) 
Indian companies, including PSUs, have been scouting for assets abroad for a while now. Given the many issues surrounding land acquisition problems in India, in addition to the quality and availability of natural resources, many companies have invested in assets and projects abroad. These developments have been done either towards diversifying their risks, expanding operations or purely for meeting captive requirements. Over the past few years, investments in emerging markets across Asia and Africa have been quite substantial.

However, the very recent news of the Maldivian Government cancelling the GMR Group's contract to develop an airport in Male has highlighted the problem being faced by such companies. Particularly that of Indian companies facing political issues overseas! There have also been cases of companies having to fight local governments.

Business Standard has highlighted some of the large projects that have gone through troubled times. These include Jindal Steel & Power's cancelation of the US$ 2.1 bn investment in La Paz, Bolivia. Another one is that of Vedanta facing labour issues at its Konkola mines in Zambia. It is believed that the workers, backed by local politicians, were demanding a wage hike of 50% for the next year. The local governments are also believed to be accusing the mining companies of evading taxes through the transfer pricing mechanism.

A key take away from this would be that of Indian companies understanding local laws better as well as also gauging the agendas of the local political parties. Also, an important factor pointed out is how to manage such issues.

India getting a taste of its own medicine?

We cannot help but relate the above-mentioned scenario to foreign companies facing similar political problems in India. This is especially given the country's dynamic policy regime. Nevertheless, it seems that the need of the hour is that the Indian government should support companies operating globally. Creating a healthy investment climate for foreign entities in India could be the first step in that direction.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

View all commentaries | Archives  RSS
Read the latest Market Commentary


Equitymaster requests your view! Post a comment on "No escape from political risk for India Inc?". Click here!


Become A Smarter Investor In
Just 5 Minutes

Multibagger Stocks Guide 2017
Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Aug 24, 2017 12:43 PM