Time To Look Inward

For a country of more than a billion the biggest asset for India is its vast teeming population. It’s been one facet of India which is so dominant yet in economic and financial issues is being brushed aside. For sometime now, government officials have been saying that India can weather this global financial meltdown because the internal and domestic demand for goods and services will ultimately save them. This as we know is a far fetched notion, but there is a lot of truth in the fact that India’s very own domestic demand is capable of denting much of the impact of the global financial crisis.

The problem lies in the fact that the opportunity for Indians to bail out their own economy isn’t being looked at too seriously. There are obvious methods like raising taxes and increasing duties but it’s not happened because it’s an election year. No matter how necessary it might be, it’s definitely not a populist measure.

Most Indians put their money in real estate or gold. The latter is definitely not a bad idea for now! Many simply lock up their cash in fixed deposits and insurance plans. Those who do want to be a part of the markets invest in mutual funds.

The effect of not having domestic consumers investing in their own stock market is there for everyone to see. The Sensex has dropped below the 9000 level and with the rate of gold futures rising and the effects of the dreaded ‘R for Recession’ word popping up worldwide, the scope for it to fall even more is a dreaded and almost confirmed possibility.

On one end incentives and awareness about equity has not been created. The only bit of information that was passed out during the famed Great Indian Bull Run that lasted for four years was the fact that anyone who invested then could simply not lose their money and their investment would be rewarded.

However that’s a notion that holds good for the most part during the BULL runs not when the BEAR phase is in play. Therefore people being asked to invest in equity respond with a lot of cynicism.

The chief market regulator (SEBI) has been spending most of it’s time in trying to obtain as much FDI as possible. The impetus has been on getting Foreign Institutional Investors to bring their money back into the Indian markets. This is something that’s not going to happen unless things change at the global financial level.

However during this time if investments can be ensured from the domestic front then not only does Indian exposure to equities become more but the prospect for growth becomes that much more real. More than anything it ensures that companies get the capital they require at a time when banks aren’t giving it to them.