Animal Spirits Are Back (On upsurge in investment)

Source: Times of India

Relevance: Private investment to boost economic growth post-COVID

Synopsis: The post-demonetisation, post-GST, and post-Covid economy is witnessing the rise of a new middle sector among Indian companies, that want to grow.

Context

The pandemic that caused economic damage all over the world has led most governments to provide enormous stimulus support for economic growth, and this easy money has triggered a stock market boom.

In just the past seven months, India has created more than 20 unicorns (startups that are valued by investors at more than $1 billion), and the chances of another 20 may be created before the calendar year is over, which is expected to create jobs and demand for various goods and services.

Apart from the foreign capital, following govt reforms have led to this upsurge in investments.

Reforms 

1. De-monetisation
2. Goods and Services Tax (GST)
3. Insolvency and Bankruptcy code 2016
4. Aadhaar-enabled financial transactions and digitisation
5. Increasing bandwidth for telecom businesses
6. Direct and Indirect tax reforms

Other factors

To this list of favourable reforms and changes we must also add two other game-changing factors of the last five years.

1. Huge investment made by Reliance to create two new customer-facing businesses in telecom (Jio) and retail. This not only democratised data usage in India, but created supportive conditions for a rapid expansion in digital businesses in India. Improving bandwidth is now aiding the rise of businesses that are a combination of digital and physical – dubbed as ‘phygital’.
2. Government’s decision to abandon its obsession with tax compliance and black money. This has been crucial, as businesses now feel more confident that legitimate money will not be targeted for tax terrorism.

Suggestions/Measures

• Improving on Contact Enforcement: We must take steps to improve our ranking in Ease of Doing Business on contract enforcement (Presently, India ranks 163rd).
• Judicial reforms: for quick disposals of commercial cases

Terms to Know:

• Insolvency and Bankruptcy code 2016
• Ease of doing Business