A nation finds its voice

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:

1. Public funds/Savings
2. 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:

1. FDI (International)
2. 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…