As India struggles to come to terms with reality, with the
Modi Sarkar’s “Acche din ane wale hai” slogan,
I have started believing that we have found our voice. And I would not really
blame the people of India; for the past ten years we were subject to politics
and politicians who were blind, mute and dumb just like Bapu’s teen Bandar (3 monkeys). Whether it was through Anna Hazare,
or that a volcano of patience erupted that India finally found its voice.
The burgeoning middle class came onto the streets (finally)
literally through protests, hunger strikes, rallies in support of the numerous
rape victims, Anna Hazare, transparency, better governance and figuratively through
the various social media platforms. For days together, facebook and twitter were
full of status messages supporting these strikes, protests and rallies.
For years, Indian politicians had ignored this middle class
and this was coming back to bite them. Economic policies were written keeping
the lower income and the super-rich in mind. The Indian middle class with
incomes in the range of INR 30000 – INR 100000 per month had developed the ‘this too shall pass’ attitude of
patience; the English version of the Indian ‘chalta
hai’. They were used to corruption, inflation, high unemployment rates, low
level education and healthcare facilities and poor infrastructure. The common
man (the metaphor) for the Indian middle class assumed that this was life and
it would not change. The idea that change had to come from within was lost; until
2011 when a series of revolts against governments erupted across the globe,
starting with the Arab Spring. India
awakened in the true sense and the demographic dividend came onto the
streets to demand what was rightfully theirs.. access to better infrastructure,
better education and health facilities, better wages, lower inflation, more transparency,
lower bureaucracy and red tapism, no corruption. This time though the youth
wanted to take charge and technology gave them an increased and more penetrated
reach. It was not only the urbane India but also the rural India that
protested. The nation wanted justice against corrupt officials, politicians and
criminals. They supported Anna’s call for implementation of the Jan Lokpal bill
and the Right to information act in the Parliament. The sheer strength in
number and voice changed the political landscape of India. The erstwhile ‘family’ politicians had to face a
massive loss at the hands of a smart, internet-savvy, forward thinking Hindu
nationalist. The BJP came to power with a thumping majority in the lower house
of the parliament. And this victory came again from both the Indias - Urban and
Rural.
People had finally found their voice and poured out in
millions on the election-day. The nation voted for a candidate they believed
could bring that change!
And this belief was not limited to only to the man on the
street but also reflected across business houses and the SENSEX. The nation had
after more than two decades elected a majority government. Now the ball is in
the government’s court to deliver. One of the jarring issues was on opening up
the economy and allowing more FDI. Growth in FDI
inflows, increases employment opportunities and thus demand that indirectly
leads to economic growth.
A country’s economic growth is generally funded by two
sources:
- Public
funds/Savings
- Private
investments
When public funds fall short, the government opens up the
sector(s) for private domestic and or international investment to bridge the
gap. Private investments can be via two sources:
- FDI
(International)
- Domestic
entrepreneurs
In fact growth in FDI inflows is one
of the leading indicators of economic growth.
GDP equation states:
•
Y = C+I+NX
•
GDP is a function of Consumption,
Investment, Net Exports
We are assuming here that FDI inflows will
affect investments. However more FDI inflows might just crowd out domestic
private sector (indigenous entrepreneurial) investments. A simple correlation analysis between GDP and
FDI inflows gives a very low correlation coefficient (0.02) indicating FDI
inflows is not the only indicator that leads to GDP growth, it is rather one of
the many that influences growth.
I may be wrong here but I really hope that the
government plans to invest more in infrastructure projects both soft and hard to
generate growth besides just exploring sectors that could be opened up for
investments. That is one change we are eagerly awaiting…
