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After the Tatas, Mahindras and TVS, it is the turn of Reliance Industries (RIL), India’s largest listed company, to start thinking of diversifying overseas. Part of the reason, understandably, is to spread the risk of operating in any one place across several countries. Many companies around the world take this route after reaching a certain scale. Aditya Vikram Birla and Lakshmi Mittal were early adopters of this ‘go-forth’ philosophy, driven in part by the oppressive economic climate of India in the 1970s and 1980s. The 1990s and 2000s saw dramatic growth at home and almost all companies profited handsomely from that. But over the last year or so, the policy climate has changed dramatically for the worse. It’s not that bad things are being written into policy; policy-making is frozen stiff and nobody wants to implement existing stuff. The main reason behind this policy paralysis is the paranoia that’s gripped mantris and babus ever since the Commonwealth and Adarsh scams blew up last year. The 2G probe, arrests and continued detention of ex-ministers, politicians, bureaucrats and company executives have fuelled this fear and Anna Hazare’s anti-graft movement has only exacerbated it. Why sign off on any file, however incongruous, when there’s the slightest chance that one might be held to task for it sometime in future? At the level of an individual, an aversion to risk can be an excellent survival strategy, prodding people towards prudent decision-making. But when an entire system is afflicted with extreme risk aversion, the outcome is the sort of debilitating paralysis that we see today. Governments gripped by this sort of affliction can stumble along for a while, but businesses need to invest and take risks if they are to grow. Unless the administration gets back to work smartly, capital will start looking outside India.
