India’s involvement in global economy to remain strong; despite shock waves in the Indian Stock Market

UPDATED: Jun 13, 2024 18:21 IST

The Lok Sabha elections 2024 results came as a surprise to the country, with the stock market fulminating excessively, sending shock waves across the investors and leading to losses that tumbled up to 30 lakh crores.
As the NDA government missed achieving the 400 paar goal, the economy was caught off guard as the investors, fuelled by positive exit poll results predicting a major win for the Modi government, put in a lot of money. The day of the result saw the Sensex, the Nifty’s worst performance since the pandemic crash, while the Adani stocks faced the brunt of NDA loss. Despite low numbers, there is hope that the Indian economy will suffer perpetually and will be able to recover the numbers, strengthening economic relations around the globe, as the new anticipated coalition government is expected to focus more on the execution of plans, whether domestically or internationally.

In conversation with Mukesh Aghi, President and CEO of USPF, we discovered that the shockingly low numbers of the Indian stock market on Tuesday does not necessarily harm foreign economic relations, especially with the United States, and is not scaring foreign investors.

“When you look at it from a broader perspective, India has a very strong position, both geopolitically vis a vis China and economically, as it is growing substantially from a 4 trillion dollar industry to a 5 trillion dollar one by 2027, and there is only hope for more growth”

The Indian economy attracts thousands of foreign investors every year, due to numerous tax concessions, industrial zones, ample workforce and labour availability combined with low labour costs and a relatively open market for direct investors. The companies seek to gain a market share of the growing economy, and looking at it from a Chinese perspective, US investors in particular are looking to de-risk the supply chain, which further attracts more investors to invest in India.
Aghi further commented that regardless of who comes to power in India, India will continue playing a critical role, from a market opportunity and a geopolitical perspective.

When asked whether he expected this result from the Lok Sabha Elections 2024, Mukesh Aghi told Geeta Mohan, “After Ram Mandir, there was a strong Modi wave, and everybody expected that number would be much, much higher. BJP brought a sense of comfort and complacency. Many people did not turn up to vote as they felt that BJP would have a strong hold regardless.

But that’s a democracy, one has to adopt and adjust to what the people want, it is crucial to understand that.”

India is the biggest democracy in the world, where people’s power is critical, and a coalition is needed to have a more centrist approach to the domestic agenda. While the economy will continue moving with fast momentum, critical reforms like agriculture need stability and the right direction to benefit the locals.

In terms of the economy, the markets correct themselves as they have knee-jerk reactions to instability, in this case the Lok Sabha election results. The stock market soared to an all-time high before the results started coming in when it quickly diminished and dropped extremely low. While equilibrium will be attained eventually, foreign investors like US companies are still looking at India as an investment hub and a market, as it's a competitive tool for them to compete globally.
There are 1600 global capability centres now in India. The largest number are by US companies themselves, with exports, technologies and services racking in 22 billion dollars.

This proves that the sentiment does not change, despite a change in power, neither does it reduce the importance of India.

Discussing the QUAD partnership, Aghi continues, “As the US is looking to de-risk the supply chain from China and China continues growing aggressively, India and the US had no choice but to come together, to benefit one another while also solving each other’s problems. Japan, India and Australia are key players in the QUAD squad and drive the agenda, which is moving further from just defence partnership.”

“Exploring the economical aspect, there is more focus on securing supply chain of critical minerals and technology”

The Quadrilateral Security Dialogue is an informal strategic forum comprising four nations, namely - United States of America, India, Australia and Japan. One of their key objectives is to secure a global order of liberal trading systems and offer alternative debt financing for nations in the Indo-Pacific regions. With growing Chinese hostilities on Indian borders, India can take the support of other quad nations to counter the communist nation and conduct strategic explorations in the Indo-Pacific regions. It plays a crucial role in Indian development as it counters China's economic and military rise.

As the new Indian government begins its tenure shortly after the swearing-in of Prime Minister Narendra Modi, who will be serving his third term, there are growing concerns amid an economy that has suffered in the past decade, while promises continue building up to fix the economy.
Currently, the fifth-largest economy globally, growth is expected by 2030.
The foreign investors are not deterred by who is in power but are rather keen to work with a new government, hoping they will benefit from newer policies and can hold a substantial influence over trade, taxes and the economy itself.

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