Indian market:What makes India a priced investment destination?

Indian market:What makes India a priced investment destination?

Analyse and comment: Indian market

What makes India a priced investment destination?

Before 1991, India was an extremely protected economy. Heavy customs barriers and tariffs prevented foreign investments in India. This was due to the nationalist and

socialist ideals of the Indian freedom movements and its leaders, according to which the country functioned since independence from Great Britain in 1947.

Until 1991, there were no imported products or even private TV channels in India. People had to wait for months or even years to get a telephone connection or

even buy a locally made care. Even the private Indian firms were heavily controlled by the government through administrative measures and red tape called the ‘Licence

Raj’ on local parlance. The goods and services were so scarce and bad quality that people craved to acquire foreign goods like Levi’s jeans and calculators. There were

no good dolls for the babies in the market and even the clothes sold in the market were of poor quality. Besides, Indians travelling abroad had the right to carry only

a very limited foreign currency.

But in the year 1991, the Indian government decided to open up or liberalize the economy and allow foreign investments gradually in various sectors of the

economy. This because the socialist model followed until then by the Indian government failed to solve the accumulating economic problems like budget deficit,

unemployment and stagnating growth.

Liberalization meant the lowering or removal of various customs and tax barriers and tariffs, a progressive opening of the Indian market to foreign investment and

goods. It also implied the modernization of the financial sector and fiscal adjustments.

With liberalization, Coca Cola , Levi jeans and many other foreign products like the French cosmetic products Oreal have become omnipresent in India. The old

Indian made Ambassador car has given way to dozens of new models of cars made in India itself by foreign entrepreneurs. There is no need of waiting for a long time to

buy a car or any other product like refrigerator.

With the opening up of the economy, most Indians feel that they have a greater choice of products and that too of a good quality. Today the people are obsessed in

buying foreign goods of all sorts ranging from cloths to cars just in order to show off their wealth whereas earlier they bought them in order to use them as Indian

made goods were of poor quality. Others feel that the economic boom had resulted in a lot of corruption at all levels of public life and has created new social

problems especially for the under-privileged people like the tribes. So they are nostalgic of the economic nationalism of the bygone era.

With more and more sectors of the economy thrown open for foreign investment, the rate of growth for the past twenty years has been above 6%. The world Bank had

claimed that poverty had receded in India, through still 37% of the population lives below the poverty line. It is also claimed that the literacy percentage in the

country has gone up. There is also lee unemployment as more Jobs were created du to foreign investment especially and also outsourcing as is the case in the

information Technology sector.

Thus the opening up of the Indian economy seems to have created a new optimism among many Indians, who think that they are at last on the road of progress and

will catch up sooner or later with the developed countries. But some others think that the opening up to foreign investment is eroding Indian’s sovereignty and

subjecting the national economy to international finance. Some even claim that the economic performance cannot be equated with GDP growth.

With the victory of the Bharatiya Janata party (People’s party) in the general elections held in may 2014, further opening up of the Indian economy had taken

place. The government had adopted the ‘Make in India’ project to attract foreign investment. Recently it resorted of demonetization to get rid of black money and

corruption hindering growth and further foreign investment. Nevertheless, it is prudent to wait and see what the economic policies of the new government will produce

how it is going to impact on foreign investment in India.


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