The economic development of a nation is reflected by the progress of various economic units, broadly classified into corporate sector, government and household sector. These units generate surplus/deficit through their economic activity.
Developing nations like India have access to primary resources and favourable demographic profile. The people of the nation also have savings (investable surplus) at an individual level, but the sub-optimal utilizing of the existing financial system to channelize this unit level personal savings into a national level capital is hindering its investing capabilities.
In the short run, foreign investment acts as a catalyst to jumpstart the industrial and infrastructural growth. However, it comes with raiders on repatriation and uncertainty during economic stress leaving the nation vulnerable to external shocks.
Among other factors, ‘Domestic Capital Creation’ and its judicious allocation is a long term solution for capital generation and stable economic development in the country. Domestic (Direct and Indirect) capital creation, i.e. investments into equity and equity linked instruments will create the requisite ‘investable capital’. It shall act as a complementary support to Foreign Investment during favourable global scenario and also provides an effective alternative during global economic stress.
Further, it shall also help people with entrepreneurial aspirations to start their ventures to help their economy grow as they will have better access to funds for their aspirations.
Traditionally, investment options of middle class segment which form a significant portion of society are restricted to investing in Fixed Deposits, Gold & other precious metals and real estate. However, a change at behavioural level along with requisite tailwinds like conduciveness of investment climate and robust financial system are required to channelize the surplus into equity and equity linked instruments.
The larger motive behind the establishment of ‘CoEF-N’ is to promote ‘Investment culture’ in the country thus directly contributing to raising ‘Domestic Capital’ and in turn, its economic development.