Foreign Funds Colonising Indian Startups – Founder Sanjeev Bikchandani founder Sanjeev Bikchandani has just confirmed what GreatGameIndia has been warning since the beginning – about the dangers of Foreign Direct Investment in India.

Bikchandani said foreign funds are the new East India Company that are colonising successful startups in India by transferring ownership overseas to skip Indian regulations and taxes.

Bikchandani says an estimated Rs 17 lakh crore of market cap has been transferred abroad after young Indian startups were forced to shift their company domicile overseas by foreign investors promising the funds they need for growth.

“Shades of the East India Company type of situation here – Indian market, Indian customers, Indian developers, Indian workforce. However 100% foreign ownership, foreign investors. IP and data transferred overseas. Transfer pricing issues foggy,” he tweeted.

“Basically institutionalised transfer of wealth away from India while living off the Indian market and Indian labour somewhat like the days of the Company rule.”

Profits from such “global exploitation” of intellectual property (IP) created in India by Indians retained overseas. “Tax to Indian govt on such profits??? Indian investors shut out,” he tweeted.

“You take an Indian startup and transfer ownership of all its shares to an overseas company that has been usually freshly floated just for this purpose. So now the Indian company becomes a 100% subsidiary of the overseas entity,” he told PTI.

All shareholders will own shares in that overseas company, including the founders, employees and current and past investors. This is accompanied by transfer of all IP and data hitherto owned by the Indian company.

“All IP developed and all data captured by the Indian entity in the future will also belong to the overseas entity,” he said. “This overseas company is substantially outside of Indian jurisdiction and the influence of Indian regulators.”

While foreign funds are most welcome, the government and its regulations must insist that data and the IP belong to the Indian subsidiary and cannot be owned by the overseas entity, particularly in sensitive sectors, he said.

“In the short run it doesn’t seem to matter and all seems well – Indian startups are getting funded. In the medium to long term, however, there is significant potentially serious negative impact for the Indian economy,” he said.

Stating that the analogy of the East India Company for these investors is apt, he said the outcomes of such investments is very similar to the colonisation of India.

“So you have a bunch of foreign investors who tell our best young startups that they will invest in their companies provided they shift their company domicile overseas. The reason being that they don’t want to be subject to Indian laws, taxes and government rules except to the minimum extent required – they say they do not trust the Indian government and the legal system.”

“So the ownership of the start-up, the intellectual property and data, all shift overseas however the other operations continue as before – they build their product in India as before using Indian manpower, they sell to customers in India as before,” he said.

The investors, he said, want access to Indian market and customers, but not the Indian government, regulators or tax authorities.

“If there are some rules that you feel should be changed, you should be in a conversation with the government rather than doing this,” he said.

“If this happens on a massive scale, you end up with a situation where the company, the investors, the value capture, the IP and the data are all domiciled overseas with little accountability to Indian regulators whereas the customers, the workforce, the development of IP and the capture of data are all in India.”

This, Bikchandani says, is an institutionalized mechanism for transferring wealth out of India on a very large scale.

“These companies will operate in India and access the market, however, they will not be Indian companies,” he said. “A domicile shift and transfer of IP and data to an overseas company is a permanent loss – and as a company grows so does this loss.”

Stating that the government is the best custodian of national interest, Bikhchandani said the policy has to comprise a package of both incentives and disincentives to encourage certain types of behaviour and discourage other types.

“And possibly enforce an outright ban on certain other constructs,” he said, adding that the government should insist that data and the IP should belong to the Indian subsidiary and cannot be owned by the overseas entity in sensitive sectors like fintech.

As GreatGameIndia reported earlier, the Indian Administrative, Civil and Judicial Services were created by the East India Company to administer loot of the colonies of British Empire. The East India Company College was specifically setup to train these officers. The college was founded by Charles Grant who made his fortune taking over local businesses in the aftermath of the Bengal Famine of 1770. It was Charles Grant who proposed the method for civilizing India by allowing Christian missionaries into India along with Christianity’s legal establishment. After independence we inherited the entire British structure designed for exploitation of colonies.

In the late 90s secret meetings took place in London where the blueprint for the ‘development’ of an entire Indian state was envisioned. Called Vision 2020, the scheme was the brainchild of an American consultancy firm born out of US military – McKinsey. It was supposed to be a role model and exported to other states of India and later to the entire developing world. Although amidst widespread opposition the people of Andhra Pradesh destroyed this ‘world’s most dangerous economic experiment’ dubbed at the time as ‘the return of the East India Company’.

Do you have a tip or sensitive material to share with GGI? Are you a journalist, researcher or independent blogger and want to write for us? You can reach us at [email protected].

One Response

  1. “It was Charles Grant who proposed the method for civilizing India by allowing Christian missionaries into India along with Christianity’s legal establishment”.. what is the catch here?

Leave a Reply