The unravelling of the merger between Reliance Communications (RCOM) and South Africa’s MTN and the travails of the Ranbaxy-Daiichi Sankyo deal highlight the changed economic environment in India. If it came to pass, the RCOM-MTN deal would have created an international telecom giant with a subscriber base of 120 million from the Cape of Good Hope to the Himalayas. As this merger was considered in the ‘nation’s interest’, the UPA government’s newest ally, the Samajwadi Party, had asked Prime Minister Manmohan Singh to arbitrate in the war between the Ambani brothers that was clouding the prospects of the deal. However, no such high-level political intervention took place, clearly exemplifying the different regime in the country today in which ‘hands-off’ policies are being, by and large, followed with regard to the economy.
In a different era, the sale of the promoter’s stake in one of India’s homegrown multinationals to a foreigner would have unleashed nationalist passions. Perhaps, the Prime Minister might have been also asked to prevent the sale of ‘national silver’. But thanks to reforms, the times have changed. Not a single political formation has adversely commented on Ranbaxy-Daiichi Sankyo deal that combines the strengths of a world-class generics company with a world-class drug innovating giant. The fact that a multinational is also trying to scuttle this impending merger is also not evoking demands for high-level political intervention. This is a welcome state of affairs. The country’s economic regime, thus, is relatively more liberal in giving market forces greater rein. Indian corporates now have greater freedom in making acquisitions abroad. Likewise, foreigners, too, are free to invest here.
It is a reflection of change that the government is making the regime for foreign investments even more liberal by reportedly planning to scrap Press Note 1, allowing foreign companies to invest in sectors where they already have a joint venture without obtaining a no-objection certificate from their current partner. All of this will send a positive signal to India Inc and foreign corporates even if some of the ‘marriage proposals’ don’t work out.