India’s New Government Must Confront Expropriation


As Indians go to the polls to elect a new government, many will be hoping that the winner of May’s election will get a grip on the corruption blighting foreign firm’s attempts to break into the Indian market.

After all foreign investment is made in the expectation that it will not be expropriated.  A few years ago, statesman Jawaharlal Nehru published a collection of his speeches with the intention of making foreign investment in India more attractive. In the book Mr. Nehru said: “We want to encourage in every way private enterprise. We want to promise the entrepreneurs who invest in our country, that we will not expropriate them nor socialize them for ten years, perhaps even for a longer time.”

Foreign Direct Investment in India today hinges on how the new government will deal with the problem and settle the expropriation charges in the Vodafone capital gains tax case and the Supreme Court ordered cancellation of 122 second generation cellular mobile telephony licenses. 

The government also runs the risk of facing charges of “creeping expropriation” – one such example of this is the recent brouhaha over QNET.

QNet is a $1 billion dollar Asian success story in the direct selling business.  In April 2013 their independent, Indian owned, franchisee Vihaan Direct Selling was accused of fraud amounting to about US$250 by a dissatisfied customer – a problem faced by many businesses in India and a frequent means of extortion.  The complaint was investigated by the local police and subsequently classified as ‘no crime’.

In August 2013, the husband of the original complainant, Gurupreet Singh Anand, refiled the complaint with the Economic Offences Wing [EOW] of the Mumbai Police.  The EOW, on the basis of a $250 complaint that had already been dismissed took matters into their hands in what appears to be a scam against the company, involving state actors.

Whilst there maybe legitimate questions to ask about the direct selling industry, the response of the EOW was disproportionate – they raided the offices of Vihaan, seized some $15 million in assets and arrested nine independent representatives of the company who were held without charge for 17 days and were allegedly assaulted and threatened.  At the time of writing, the case rumbles on and a media campaign against QNet continues.

However, further investigations reveal the complainant, Gurupreet Singh Anand, should also be subject to police investigation.  In October 2013, his sister reported him for assault after he beat their father with an iron bar.  He was eventually arrested in February 2014 and then released.  Sworn statements have been made to the Joint Commissioner of Police that Anand attempted to procure sex via the internet with an eight year old girl – so far no action has been taken.

That same commissioner is responsible for the Economic Offences Wing of the Mumbai Police.  It would seem creeping expropriation in India today is leading to real crimes such as assault and paedophilia going unpunished.

As QNet continues to appeal for regulation in India so that genuine companies can operate without fear of being accused of running any sort of ‘scheme’ or being subject to any kind of expropriation, we will just have to see how this continues to play out.  Cases like this are difficult for outsiders to understand or navigate and as long as they exist, the country’s growth rate will continue to stall and foreign investors will flee.


Get more information, facts and figures about QNet, click here for the QNet overview.

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