The podcast dives into the remarkable surge of Indian domestic investors post-COVID, as they take center stage in the market. It questions whether India remains an attractive destination for foreign investors amidst ongoing challenges. Labor force statistics reveal a pressing need for job creation, highlighting societal demands. Additionally, insights from the RBI governor shed light on inflation trends and economic growth, while alternative investments and fintech regulations reshape the financial landscape.
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Quick takeaways
The unprecedented surge in domestic investors in India has brought them close to rivaling foreign investors in equity ownership.
Despite the growth in domestic investment, India faces challenges in attracting foreign investment, necessitating a more favorable business environment.
Deep dives
Rapid Growth of Indian Investors
The Indian markets have seen a remarkable increase in the number of unique investors, reaching a milestone of 10 crores in July 2024. This surge is reflected in the drastic rise from just 1.5 crores in 2013 to 6 crores by 2022, demonstrating a rapid doubling of investors within a mere two years. Alongside this trend, domestic institutional investors (DIIs) have begun to rival foreign institutional investors (FIIs) in equity ownership, with DIIs holding 16.2% compared to the 17.4% share of FIIs, which is the lowest in over a decade. The growth in retail investment ownership is also notable, as retail investors now account for 7.6% of Indian equities, showcasing a significant shift in market dynamics since the pandemic.
Challenges for Foreign Investment in India
India is in a crucial phase where enhancing foreign investment is essential for its economic potential, but it faces significant challenges in attracting such investments. After experiencing a downturn post-2009, the foreign direct investment (FDI) landscape has been inconsistent, with stark drops in inflows, highlighting that India needs to foster a more investor-friendly environment. For instance, while the country attracted $84.8 billion in FY 2022, numbers plummeted to only $26.6 billion in the subsequent year, making India drop in global rankings for investment. Creating a conducive business environment with stable regulations and streamlined processes is critical; otherwise, foreign investors may continue to withdraw their funds.
The State of Employment in India
India's employment situation remains a pressing issue, with significant portions of the working-age population not engaged in the labor force despite a slowly improving labor force participation rate. Currently, approximately 900 million Indians are of working age, yet only a little over 50% are included in the labor force, indicating a considerable gap. Moreover, the gender disparity is concerning: while over 70% of men participate in the workforce, only 23% of women do, although there has been a positive trend of increasing female participation since the pandemic. Even though the unemployment rate is stable at 6.7%, the growing size of the labor force indicates that creating more jobs continues to be a fundamental challenge for India's economy.
In today’s episode, we look at 4 big stories:
- The relentless rise of the Indian investors
- Is India open for business?
- Just give me a job
- RBI governor has some things to say
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If you prefer video: https://www.youtube.com/@marketsbyzerodha
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