Three deadly Covid Wave or Ukraine War, the Indian financial market has effectively dealt with all these once-in-a-century crises. When stable & large economies like the US are crumbling with stagflation, India becomes a unique case study, in that it manages to cater to about 130 crore population and still manages to maintain its GDP growth rate. Moreover, in the total chaotic and the economically collapsed world, the Indian financial market is reaching new heights.
Indian middle class holds the key
Union Finance Minister, Nirmala Sitharaman at an event of the Ministry of Corporate Affairs lauding the key role of Indian retail investors in crises said that “retail investors have in a big way that they seem to act as shock absorbers. If FPIs (Foreign Portfolio Investment) went, our markets did not really have to show their ups and downs in very distinct ways because small investors in the country have come in a big way”.
Her statement reflects the key spirit shown by India in these difficult times. We not only feed about 80 crore population with free delivery of rations in lockdown but managed to maintain the growth trajectory of India. It is not that we were made ready in the pandemic itself to fight this crisis, but it was the reform, schemes, laws, and policies undertaken after 2014.
Strengthening Indian Investors
Investment is a market instrument to grow any business. Where investors invest with the purpose to gain some profit and businesses accept these investments with the purpose to gain profit not only for their businesses but also for the investors. In a way, this cyclic structure helps the economy to expand and grow.
But what if investors do not have sufficient funds to invest? Obviously, the market will slow down and ultimately lead to stagnation. So the fundamental thing for investment is a fund and after that a platform to invest.
The multiangular problem was solved with the digitization of every service. The government’s successive policies like digitization and integration of Bank, Addhaar, and mobile helped to streamline funds. It becomes easy for the common public to save and earn profit through other means. It solved two problems, it helped common people to save their funds with bank safety, and the second provided Indian businesses to expand with public investment in the form of retail investors.
According to Central Depository Services (India) Ltd, in March the active Demat accounts touched the six crore mark. The confidence of startups to go public lies in the fact that about 8% of common Indians are heavily investing in the financial market. One on hand, large investments in the financial market and high consumption are helping key industries to grow and on the other, these high businesses are diversifying the profits in startups through venture capture, equity, or stocks. In a way, the circulation of money, investment, profits, and businesses are helping India to grow independently.
Indian unique market
Moreover, Indian businesses are mostly catering to domestic demands. Growing purchasing power, high savings, high profits, and a large population are multiplying the internal business of India.
The result of this growth & development also makes a lucrative destination for foreign investment. So in the form of FPIs, huge investment in the Indian financial market is happening due to the large return forecast. According to data, FPIs investment in the covid year (2020) was around 1.03 lakh crore. But as it is said, markets run on sentiments, they also quickly pull off the investment with any movement in the world. So with money, FPIs also bring volatility to the market.
But the unique self-sustaining business market of India acts as a shock absorber to such volatility and stabilizes the market conditions. So, the finance minister’s statement that retail investors work like shock absorbers is in consonance with the fact that 6 crores of young Indians are holding the fort of the financial market and helping the businesses, market, profits, and tax collection to grow collectively.
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