The global financial crisis in the past one year had compelled foreign investors to pull out huge sums of money from the emerging markets causing the indices in these regions including India to plunge. But it appears that the appetite of these foreign investors for emerging markets seems to be on the rise again and India in this regard seems to be pulling ahead. As reported in a leading business daily, while India has pulled in US$ 1.8 bn of foreign money, other emerging markets such as Indonesia, Philippines, Taiwan and South Korea have bagged US$ 18 m, US$ 531 m, US$ 632 m and US$ 7 respectively. The perception is that global liquidity is improving and that there are not likely to be any major reversals in these flows immediately unless the risk perception about emerging market equities heightens again. Also, those foreign investors who have been sitting on huge piles of cash are now taking the opportunity to invest in emerging markets including India where valuations are very attractive currently.
It is important to look at the holistic picture and have an individual opinion rather than get swayed away by the public consensus. This is the view of the man who pioneered the retailing boom in India - Mr. Kishore Biyani, the founder of India’s largest retailing company - Pantaloon. In an article in the Wall street Journal, Mr. Biyani wrote, "Almost daily doses of bad news on television screens and newspapers have possibly done as much damage to the economy as the events on either side of the Atlantic." I completely agree with him. Mr. Biyani’s predicament is based on the fact that an overwhelming majority of Indian consumers are self-employed, who can neither get laid off nor can have pay cuts. Consider some statistics he has provided. The share of the national income represented by proprietor-run concerns and partnerships is 35%. The share of companies is around 15%, government around 25%, and agriculture around 25%. Combine agriculture and the self-employed in industry a...
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