How
bad governance and an elephant footed Judiciary is derailing the Indian economy...
By
all estimates India is poised to be the third biggest economy by 2050 sharing
space with China and America. It is all set for a very high growth trajectory
eclipsing China’s high growth rates anytime between 2015-2020. The basis of
these estimates remains that India’s political landscape remains stable and
policy framework remains strong. But as we are all set to board a high speed
growth train, suddenly we have acquired travelling sickness (in terms of poor
governance, policy logjam and slow justice). We are not in the best frame of
mind to board the train. Rather the train is apprehensive to board us, lest we
spoil their spick and span train with our sickness. It is thus giving us time
to sort out our sickness before we are afforded an opportunity aboard the
fastest economic growth train. This is one train we cannot afford to miss and this
is one train we want to board with our best foot forward.
India
is an emerging economy with a young population and strong economic
fundamentals. Free judiciary (though the speed of justice remains a drag),
democratically elected government, independent central bank and developed
financial markets are the pillars of our economic growth and red tape,
corruption and poor infrastructure remains the irritants in the growth process.
The
question that we are answering here is how and why bad governance and elephant
footed judiciary jeopardizes the good work and threatens to derail the economic
growth engine?
India
remains heavily dependent of foreign investment in order to sustain and
increase our GDP growth rate. Currently we import more than we export, thus the
current account deficit and we pay for our imports (which are more than our
exports) by borrowing from abroad (foreign investment). FDI in any form is
welcome as that is helping the country generate growth and thus this form of
foreign investment is pro growth. Foreign investors when investing in a country
look for the following parameters:
1. High growth rates – India is currently in the
high growth phase and thus investment by foreign investors in India is giving
them high return on their investments.
2.
Current account deficit
3.
Fiscal and monetary policy
4.
Fiscal deficit
5.
GDP/Debt
6.
Liquidity
7.
Political Risk Premium
8.
Stability of currency
I ‘ll
try and brief on parameters in the next blog.
