Foreign investors fall for the new rock star in India

When you are determined to do something, it is said that the entire universe (kaayanaat as they say in Urdu) comes together to help you. And once you start moving towards your goal, the results start coming. So who takes the credit then? Well, it is the leader both ways. The credit or any otherwise goes to the leader.

Something similar is happening with Prime Minister Narendra Modi. His determination to work hard and fix the problems has, it appears, made the entire universe chip in to help him out. If one looks back, you can notice that everything has started falling in place after the elections. Fortune too contributed in no small measure.

The crude oil prices of the Indian basket have dropped sharply from $104 per barrel to less than $70 per barrel — more than 30 per cent drop. Without going into the global reasons for crude oil crash, it has really helped the Narendra Modi government to repair the fiscal balancesheet, giving confidence to finance minister Arun Jaitley to rein in fiscal deficit within the range budgeted for 2014-15, which is 4.1 per cent of the GDP.

Besides, the fall in crude oil prices has helped bring down the inflation both at the wholesale and at the retail to less than six per cent bringing much needed relief to the common man.

So very clearly the global factors have really helped the government which was determined in any way to deliver on the promise of good, fair governance with integrity. These factors have all then joined to reinforce the confidence of the global investors in the Indian economy.

No wonder, the inflows from the foreign institutional investors (FIIs) and the foreign direct investment (FDIs) are pouring in, giving a huge space of stability in the foreign exchange market to rupee at a time when there is a huge pressure on the currencies of all other emerging economies against the dollar which is on the upswing.

The Prime Minister is a great communicator and is able to connect with his audience in a very convincing way. It is this ability of his and the kind of credibility wave that he is riding on that Mr Modi has been given the epithets such as “rock star” of sorts.

But the global investors are much more serious players and can see through the substance behind a rock star. The Prime Minister has successfully convinced them that he can be both rock star and a man of substance. Though it is not to suggest that the rock stars are not men or women of substance.

He has delivered in terms of taking right decisions in liberalising FDI rules for and limits for railways, defence production and real estate besides working hard to build consensus on hiking FDI ceiling in insurance.

As an Assocham study showed that the best is yet to come for the Indian stock market in terms of inflows from foreign institutional investors. In the current fiscal, FIIs have done the net transactions of Rs 60,083 crore, and Rs 75,334 crore in 2013-14 — these numbers are much less than the best years of 2009-10 and 2010-11 Taking the debt and equities together foreign investors have brought in $40 billion since January. Likewise, net FDI inflows totalled $14.1 billion in the first five months of 2014-15, representing a 33.5 per cent year-on-year increase.

(The writer is the secretary general of Assocham)

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