Free domestic capital from onerous fetters

Our regulations are increasingly restrictive and create a compliance load. We should not be crimping our nation's entrepreneurship

- Janmejaya Sinha

My most fervent wish about India is that all Indians have the chance of a life worth living. It is not in doubt that India will M become the world's third largest economy before the decade is over. But to join the ranks of developed nations by our 100th year of Independence, we will need to increase the productivity of our human capital and better use our domestic capital. I have often talked about the need to invest handsomely in our soft infrastructure; however, the focus of this piece is on giving some freedom to our entrepreneurs in the use of domestic capital.

There is a lot of talk around domestic capital formation and disappointment that the savings rate has come down below 30%. There is also discussion around improving the liquidity and depth in our bond markets. However, there is not much discussion on how the capex cycle really runs in India and what is needed to give it a boost. Arguing a sui generis case for India in the face of established theory is always a lonely path, but one that I will embark on in this piece.

The Indian economy is very different in its structure from the economies of the United States (US) and United Kingdom (UK) on multiple dimensions in the stage of development, in the depth and liquidity of equity markets, and in the importance of family owned and managed businesses. India is a bank-led economy.