In recent times, we have heard a lot about foreign money coming into India. It is really surprising to know the country which was failing till few years back on every economic ground seems to be one of the favored hunting grounds of many international organizations. As many of us love quoting ‘Everything has changed slowly and gradually’, India’s fortune has changed in last couple of years. The point to ponder here is how things have changed? What factors have contributed to this change? Let’s try to identify some of these factors that have really pushed this country’s fortune to new unsaid limits.
Firstly, I believe the credit goes to necessity. As we know, necessity is the mother of all invention. When our reserves stood at ~USD 6 billion in 1991, we had to open shutters to allow foreign money to enter and save sovereign solvency. It was not in actual the proactive approach but a passive approach. The wave of liberalization that started in 1991 is still on to sustain the economic growth (and not economic development)
The second reason of the high capital inflows is India’s undervalued currency. With few dollars measuring to lot of Indian money, foreign money can buy lot of stuff at the unbeatable price. From raw material to human skill set, India proved to be an attractive destination to the western world. This lead to the emergence of offshore outsourcing concept where foreign companies looking to cut down their cost and still maintaining the quality saw great opportunity in India as a low cost service provider
India’s demographic composition also aid in the growth. With population density one of the highest in the world, India not only proved to be low cost destination but a market in itself where the foreign corporate hungry for growth found a high growth market for their products. With western markets already reaching saturation in terms of growth of many products, corporate see India as a lucrative market for sustaining growth and increasing shareholder’s value.
Indian education system has contributed in building country’s competitive advantage. The colleges in India have been able to build a brigade of young professionals that provide quality work at unmatchable price to the foreign companies. Emergence of IT, ITEs, BPO and KPO is the prime example of the same. Some companies have also installed their manufacturing units to take advantage of the India’s cheap and yet quality manpower.
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