India - No Country for Strongman

Do Global Corporations and Investors consider India becoming un-democratic, autocratic??Should they worry about Modi being a ‘Strongman’?

These are legitimate worries. India is now in the radar to be the next China. Global corporations and Global institutional investors are looking to invest billions of dollars in India as a strategic long-term investment opportunity. India is also a strategic counter to moving investments and production away from China. Can investors trust Modi?

Global Corporations and Investors have seen the financial impact of investing in undemocratic, strongman led countries. History is replete with several such examples of political ‘strongman’ destroying economies and markets. One doesn’t need to reach out to history books. In our recent memory, we have seen countries like Brazil, Turkey, Russia and increasingly China, taking decisions which reverse several years of trust and confidence.

Such decisions have made some of these countries ‘uninvestable’. Under certain leaders or certain regimes, investors will avoid making investments.

We do not think this worry has got anything to do with the form of political system. Corporations and Investors have well invested in countries and markets which are run by communist ideologies, monarchies, military governments.?The worry stems from individuals who have unlimited power to decide and destroy.

Narendra Modi is extremely popular. He is now in his second-term as prime minister with a decisive mandate and looks very likely to win a third term in 2024.

However, India is not China, Russia or Turkey. Modi is not a Xi, Putin or Erdogan.

1. India is a parliamentary democracy with US like Federal, State and Provincial structure.
2. Indian administration is de-centralised
3. People power and protests – a mark of democracy - is alive in India
4. Barring the act of demonetisation – Modi has not destroyed the economy. Investor sentiment on the contrary has been buoyant towards India.
5. India needs foreign capital – Modi cannot afford to antagonise global corporations and investors
6. India is an aspirational lower income country. India’s young demographic profile needs job creation to reap the dividends. Modi is aware of the social and political perils of lack of growth and employment.
7. Democratic Institutions: Be it the RBI and SEBI in banking and capital markets; to the courts from magistrate to the supreme court; and to other sectoral regulators – have been seen to uphold the rule of law.?

For a more detailed analysis, please read: https://www.qasl.com/post/india-no-country-for-strongman