Courtesy of The Economist, an article on India’s investment approach in other developing nations:

In Central Lusaka a brand-new flyover flutters with the green, white and saffron of the Indian flag. Throughout the Zambian capital lorries produced by Tata Motors, part of the steel-to-tech Tata empire, are used in everything from construction to rubbish collection. Signs inside the vehicles instruct drivers in both English and Hindi. The lorries’ occupants phone each other over a mobile network run by Bharti Airtel, an Indian telecoms firm.

Zambians, like those in many developing countries, are vocal about their dislike for the Chinese firms that invest heavily there. India is also a big commercial presence but no one bats an eyelid. Tata Motors has huge assembly plants from South Africa to Malaysia. Bharti Airtel is one of the biggest telecoms operators in Africa. The Aditya Birla Group is the world’s largest producer of carbon black, an ingredient in car tyres. It is one of Egypt’s biggest industrial investors and exporters.

Even in strategic sectors, such as infrastructure and communications, Indian foreign direct investment (FDI) is not viewed as geopolitical scheming or hegemonic ambition. “That’s one of the selling points for India,” says Gareth Price of Chatham House, a think-tank. “With the obvious exceptions of Pakistan and China, everyone is kind of all right with India.”

India was once compared with China as an emerging-market power with capital to splurge. The spectacular rise in Chinese investment over the past decade has put paid to such analogies. Now poor countries are trying to finance their recovery from the covid-19 pandemic without deepening their debt or their dependence on China. India’s forays are tiny in comparison—around 7% of China’s total stock in FDI in developing economies (excluding investment in Hong Kong which is sometimes included). But its approach has lessons for foreign investors trying to go about their business without raising alarm bells.

Developing countries have long invested in each other. India was one of the organisers of the Bandung conference in 1955 which highlighted “South-South” co-operation. Some familiarity with the delays, chaos and financing constraints common in fast-growing economies is useful.

Indian investments in the rich world grab headlines. Deals such as the Tata Group’s acquisition of Tetley Tea or Jaguar Land Rover involve household names, hundreds of millions of dollars and a smack of reverse-imperialism. But India’s stock of outward FDI to the developing world is about the same as its stake in rich countries, and has been growing more steadily over time. In 2019 it reached roughly $46bn, according to the latest estimates from the UN Conference on Trade and Development, up from around $40bn in 2010. About $30bn of that is in Asia and around $13bn is in Africa.

Some of the data are sketchy. Multinational companies headquartered in India set up local subsidiaries. They route money through tax havens such as the British Virgin Islands. And the 18m-odd overseas Indians (those born there or with Indian citizenship) include many entrepreneurs who switch passports and register businesses locally. “It becomes a jigsaw,” says Jai Bhatia of the University of Cambridge.

Even if some pieces of the puzzle are missing, the figures point to the first and foremost reason why India is not viewed with the same suspicion as China: scale. India’s investment abroad has grown but Chinese investment in the poor world rose to $645bn in 2019, up from $83bn in 2010, eclipsing India’s investments.

But statistics do not tell the full story. Indian investors have deep roots in much of the developing world. Indian traders began settling around the edges of the Indian Ocean centuries ago. In the 19th century thousands more were sent to far corners of the British empire, to work on plantations in Mauritius and build railways in Kenya. They stayed and built their own businesses. Others braved long journeys on dhows to join them in Africa. “We tend to view things ahistorically and through a geopolitical prism, so it is all about China,” says Parag Khanna, an international-relations wonk whose father worked for the Tatas in Africa. In a sign of the region’s shifting power dynamics, the railway that drew Indians to Kenya in the 1890s has been replaced by a Chinese-built line called the Madaraka Express, after the anniversary of Kenyan independence from Britain.

Generations of migration to Africa have helped breed familiarity with India. The Indian diaspora has faced resentment, notably in the 1970s around the time the then-president, Idi Amin, expelled Asians from Uganda. But the government in Kenya has gone as far as recognising Asians as the country’s 44th official tribe. Vimal Shah, whose grandfather emigrated from India, started the Bidco Africa juice-to-cattle-feed empire with his father and brother about 35 years ago. He knows the best Indian food in Nairobi and volunteers at the Jain community centre, but has a Kenyan passport and sees himself as thoroughly Kenyan. “I’m not a desi [local] from India,” Mr Shah says.

A second reason India seems less threatening is that state-run firms are not the ones doing the investing. ONGC Videsh is one of the few sizeable government-owned businesses operating abroad. It has bought up assets from Mozambique to Colombia. But the company’s firepower does not compare to that of its peers in China. Sinopec, a state-owned oil company, first muscled into the Angolan oil industry in the mid-2000s. It gazumped ONGC to buy a stake in a block from Shell, an oil-and-gas giant. Jonathan Hillman of the Centre for Strategic and International Studies points out that India has nothing comparable to China’s Belt-and-Road Initiative, a global infrastructure-building scheme. “The Indian government hasn’t spent as much time presenting grand visions,” he says.

Most Indian investment abroad involves private-sector companies going elsewhere for strictly commercial reasons. After independence, industrialists looked beyond India’s borders to escape monopoly-busting regulation. India Inc’s first foreign venture was a textile mill set up by the Birla Group in Ethiopia in 1959. The conglomerate expanded across South East Asia, where economies were opening up. A second—bigger—rush of FDI came with liberalisation in the 1990s when India loosened capital controls. Indian businesses undertook 4,590 foreign projects last year, up from 395 in 2000, according to data crunched by Prema-chandra Athukorala of the Australian National University.

India’s first prime minister, Jawaharlal Nehru, was a staunch believer in anti-colonial solidarity and refused to use overseas businesses as a tool for foreign policy. Successive governments in New Delhi have followed this lead and offered limited support to Indian businesses’ efforts abroad. Diplomats mourn the fact that they can do little to help their compatriots beyond courting local governments and rolling out the red carpet for visiting industrialists. Gurjit Singh, a former ambassador to Germany, Ethiopia, Indonesia and elsewhere, sees government support in reducing the local cost of financing Indian investment as the solution. India provided $7bn in official medium- and long-term export credit in 2019, according to the Export-Import Bank of the United States, making it the world’s fourth-largest provider but still far behind China’s $33.5bn financing.

A wasted opportunity

Manu Chandaria, who was born in Kenya over 90 years ago to Gujarati parents and is now one of east Africa’s best-known industrialists, laments the fact that the government in New Delhi has not made the most of ethnic Indians abroad, using them as neither “a tool” nor “a resource.”

But the lack of government backing can be helpful to Indian companies. Bharti Airtel, which has controlled a large share of Africa’s telecoms market since its 2010 acquisition of Zain Africa, a Kuwaiti telecoms company, has obvious strategic power. Akhil Gupta, a high-up at the company, says Airtel would “without question” do anything an African government asked, including disconnecting their service. But he would not take orders from the Indian government on how to run Airtel’s overseas operations. “That is the beauty of democracy,” he says. The implication—that, unlike Chinese firms, Indian companies do not take orders from their home government—makes them less threatening.

The third reason India raises fewer hackles in emerging markets stems from the manner in which it goes about investing. In Africa, where worries about exploitative investment, especially Chinese, are common, Indian investors include families who have been doing business there for generations, multinational investors headquartered in India, and entrepreneurs who have arrived in recent years (disparagingly branded “Rockets” for their tendency to make their fortunes and head home).

They have a reputation for doing a better job than the Chinese at hiring and buying locally. There is some truth to that. In 2006 the World Bank surveyed almost 450 businesses in Africa. On average, Chinese firms employed almost a fifth of their workers from China and other East Asian countries, whereas Indian firms brought less than 10% of their workers from India. The Chinese businesses imported 60% of new machinery from China; their Indian peers bought just 22% from India. That trend continues today, says Harry Broadman, the economist who led the research.

That many of these Indian groups are family-run may explain sympathetic local attitudes. Executives worry about their founders’ reputation as well as that of India. Rudrarup Maitra, who looks after Tata Motors’ international commercial vehicles business, talks about the company’s contributions to development in its overseas markets, including its efforts to get ambulances to Sri Lanka and rubbish trucks to Nigeria. “There is definitely a responsibility we have to brand India,” he says.

Not all Indian-origin businesspeople excel as ambassadors for their country. Mahatma Gandhi is one of the most famous Indian migrants to South Africa. But the Gupta brothers are well-known too. The trio, who moved from Uttar Pradesh to South Africa in the 1990s, were at the centre of the corruption scandal that ended the presidency of Jacob Zuma. Elsewhere, Vedanta Resources is currently locked in a gnarly dispute with the Zambian government over its copper mines.

The arms-length relationship between New Delhi, India’s political capital, and Mumbai, its commercial centre, works well in good times. When India Inc messes up abroad, India looks bad. When the state’s relationship with another country gets complicated, investors find doing business there harder. “Does flag follow trade or does trade follow flag?” asks Tanvi Madan at the Brookings Institution in Washington. “What you find is that they become intertwined.”