Modi’s magic is much talked about when it comes to unprecedented pouring in of investment in India by overseas investors. Numbers speak for themselves. While USD 55.6 billion as FDI inflows in the financial year 2015-16 broke all records, the numbers were at astounding USD 60 billion for the following financial year.
But is it only the reformist stance of the present dispensation that has fueled the interest of investors towards Asia’s third largest economy, or are there other factors too that are playing a silent yet crucial role? Here, we shall take a note of a few such driving forces.
Political stability
First and the most decisive among all is the political stability in the country. Now ask yourself, while the world is debating China’s hegemony, will an investor not be keen in placing his bet on an economy that has outshined China? And this is surely not the outcome of the reformist agenda; Make in India, easing setting up of business in India, GST and other reforms.
High growth rate
GDP expansion of the country that has displaced China from top position is another key reason. International Monetary Fund (IMF) has projected India to grow at 7.7% in 2018 which is very attractive for the investors, especially given the adverse economic situations in other parts of the world.
Cheap labour and the demographic dividend
Cheap labour and the demographic dividend that India possesses are other forces making us the favorite. China’s growth story was scripted on the back of cheap and abundant labour; the benefit now has diverted decisively to India. On the other h and, while countries like Japan are aging, India is powered with tens of millions of young h ands ready to push economic growth further.
Exp anding startup ecosystem of India
The startup ecosystem in India too wasn’t a product of the 2014 general elections or reforms that had followed. Tech startups of India had already gained the attention of VCs and PEs, thus projecting India as a comprehensive market fully ready to be explored for better returns on investment. With Amazon, Uber, eBay setting up businesses here, we have been the talk of the town since long.
Growing middle and upper class
Another key force is the growing middle and upper class of India. Now with swelling spending capacity what will these buyers do? Of course, they will purchase more, and these purchases will come from goods and services produced by enterprises. And it is these enterprises which are being backed financially by foreign entities and groups, besides commitment of setting up factories in India by overseas giants like Foxconn, etc.
India’s growth story isn’t new. Thus only hailing the reformist stance of the government for the entire surge in FDI is like sidelining other factors. This does not mean that the government cannot claim its right to this success. Through its various economic and political reforms, investor friendly policies and most importantly phasing out the Foreign Investment Promotion Board (FIPB), the state has surely complimented the natural factors noted above. Now the need is to push for another set of reforms such as comprehending and delivering on the needs of tech startups of India that have come under considerable pressure owing to their deep-pocketed foreign rivals.
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