This is the second piece Rajeev and I penned for our new column in Mint
India’s economic growth has been achieved on the back of sustained investment and improved capital allocation in the economy made possible by structural reforms. However, we are once again approaching a scenario where India may be heading into an investment famine, which would then translate into sub-par growth.
But India is being starved for investment just when several domestic institutions have significant investible capital but are barred from deploying this capital in the economy as equity investors. Recently, HDFC chairman Deepak Parekh said that thanks to lack of clarity on the policy front and poor governance, India’s blue chip corporations are all looking to invest abroad. Mr Parekh has also remarked that India is unable to come up with world-beating products because of the paucity of risk capital for investment in innovation.
The fact that the India story is simultaneously losing its sheen both at home and abroad compounds the need for worry – if foreign investors turn sour on the India story and India’s blue-chip companies start focusing on global expansion, how will India find domestic investment needed to sustain economic growth?