In defense of MNCs

The strict stand of the Supreme Court of India in the case of misleading advertisements and false claims by the Patanjali Ayurveda is important. A clear verdict in this case and guidance to the State for framing & enforcing stricter norms for alternative treatment methods, especially for mental and sexual health problems, is long overdue. Any person who has traveled long distances in Indian trains and roadways buses must be aware of how misleading advertisements and claims are used by unqualified, and often fraudulent, medical and spiritual (for lack of better word) practitioners to swindle the gullible common people. There are millions of cases of these practitioners causing irreparable, and often fatal, harm to unsuspecting patients.

The Supreme Court’s verdict, in this case, would be a timely reminder to the State and the people about fundamental duties prescribed under the Constitution (Article 51-A, inserted through the 42^nd Amendment), especially the duty to “Develop scientific temper, humanism and the spirit of inquiry and reform.” (Article 51A(h))

Considering the present state of affairs, creating awareness about developing a scientific temper; showing empathy towards fellow citizens; examining the information for fake & manipulative content; and implementing social reforms are critical for sustainability and growth.

I have been frequently writing about the misinformation campaign being run by several self-styled spiritual gurus, against the multinational corporations operating in India. I may reiterate what I have been saying in the defense of MNCs.

In the defense of MNCs

I am not a regular TV watcher. I have also reduced my social media interactions by almost 80% in the recent past. For my socioeconomic views and investment strategy, I am therefore completely reliant on what I see with my own eyes and feel with the weight of my wallet.

I had the opportunity to hear the promoters of Patanjali Ayurveda. They have always been critical of all MNC players in Indian markets and often claimed to be working actively to annihilate them. One of the promoters claimed that their commercial venture is a torchbearer of the larger Swadeshi (self-reliance) movement taking place in India. Once, he categorically stated his endeavor shall chase away all MNCs, like HUL, P&G, Colgate, etc.,  who have plundered wealth from Indian consumers for over a century. He alleged that these companies are plundering money from Indian consumers and taking it abroad to benefit their parent organizations.

Surprisingly, the government (which appears keen on MNCs investing in India by making India a better, easier, and safer place to invest and do business); various business and industry associations (who are duty bound to protect the interest of their members and ensure a level playing field); and a variety of other regulators and administrators, have made any murmur of concern over this.

Ostensibly, Patanjali marketing campaigns are overwhelmingly based on (a) an emotional appeal on grounds of patriotism and Swadeshi; and (b) materially better quality of Patanjali products as compared to the products of MNCs.

Insofar as the quality of products and use of "dangerous" chemicals etc. is concerned. I am not competent to comment on this subject. However, I do have an observation to share on the issue of plundering money from Indian consumers.

In my view, the owners of a corporate entity can get money from the entity only in two forms - dividends and return of capital. Return of capital in a normal course occurs only if the business is wound up (ignore buybacks etc. for a while).

·         An analysis of listed companies having 50% or higher foreign holdings suggests that foreigners own more shares in the companies popularly perceived to be "Indian" rather than those condemned as MNCs.

·         173 companies having over 50% foreign holding paid a total of Rs769bn as dividends for FY23. Out of this Rs551bn was paid to the foreign shareholders while Rs218bn was [aid to the Indian shareholders. These companies paid Rs825bn as salary and wages.

·         The top 10 companies popularly perceived to be MNCs paid a total of Rs203bn as dividends to foreign shareholders in FY23; whereas the top 10 companies popularly perceived to be Indian paid a dividend of Rs443bn to foreigners.

·         Against a dividend remittance of Rs203bn, top ten MNCs incurred Rs646bn as employee cost, which is paid predominantly to Indians. Besides, these MNCs sourced most of their raw material from India, got their products manufactured by Indian contractors (mostly SMEs), and created significant business opportunities for the people engaged in their local supply chain. Maruti alone would have supported hundreds of SMEs to build sizable businesses, employing millions.

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Many of these MNCs have put India on the global roadmap, in terms of quality of products, technology, innovation, and even export markets. For example, Maruti Suzuki has helped thousands of ancillary units (mostly in the SME space) to grow and register their presence in the global arena. HUL has cultivated many managers who have grown to become global leaders.

One must be alarmed if someone like Patanjali promoters express their intention to annihilate these MNCs. The Swadeshi champions may also note that if these companies decide to wind up their businesses, sell their assets, and take the money home, the outflow will be much larger than what would possibly they remit as dividends in the next 50 years. The consequent job losses would be catastrophic.

It would therefore be only appropriate that the State takes the lead from the Supreme Court verdict in the Patanjali case and explicitly announces its stance on this issue.