While concerns about a slowdown in investments and a widening current account deficit are genuine, quantitative easing by the U.S. Fed, whether it continues or is brought to a complete halt, will not have much of a drag on our country’s economic growth as long as foreign portfolio investors, foreign institutional investments and global investment banks see growth potential in India; this has been happening all these years and will not wane.
In this context, it may be recalled that in the years preceding the U.S. financial meltdown in 2008, our country achieved three consecutive years of unprecedented GDP growth rate and there were massive FDI investments too made by global investors because they envisioned great potential for growth in the industrial sectors following liberalisation.
Even though the U.S. Fed raised interest rates for the first time in almost a decade just before the end of 2015, and even subsequently once more for the second time in December 2016, which sparked anxieties of an exodus of valuable FDI from our country, our real estate sector, which is a vital parameter that global rating agencies judge to estimate a nation’s growth prospects, has been receiving healthy infusions from foreign fund owners.
The providential silver lining in this current episode of QE tapering off is that international crude oil prices are forecast to decline in the coming years as a growing number of automobile makers announce plans to roll out electric vehicles in the developed world.
It will also be prudent for our market regulating bodies to see this current development of QE conclusion in a wider context and introduce provisions to liberalise the investments of our domestic mutual fund companies which are beginning to see massive inflows from retail customers, but which are mandated to invest only in equities and debt in the domestic market. SEBI and the RBI should strike when the opportunity is ripe. As the U.S. tech sector, automobile sectors and other industrial sectors are expected to see positive growth, it would be good if they grant Indian retail investors an indirect opportunity to explore the lucrative overseas market.
Aravind Sridhar,
Bengaluru
