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Delhi Commonwealth Games: Impact on India Investment Story

 Despite the missteps leading up to the Delhi Commonwealth Games, Indians can be proud of the resounding success of the actual event.  From the spectacular opening ceremony, the inspiring performance of India's athletes, to the spectacle that was the closing ceremony, the cynicism targeted at (a) the organizers (well deserved) and (b) the country (overwrought hype) fell away.  It was replaced temporarily, at least from my view, by hope and confidence shown in the faces of a nation in ascendancy, and properly reflected by A.R. Rahman's games theme video.  The show was quintessentially Indian, and I would not even take away the crowd's jeers and boos at the opening and closing ceremonies, nor the similarly tinged CWG Twitter and Facebook feeds of India's digital class.


Note: The following is a cross-post from, where I blog on India investment themes.  NRIMatters is a joint initiative of the Indian Ministry of Overseas Affairs and the Confederation of Indian Industry for engaging overseas investors.


It is easy to be cynical about these things, the mismanagement, the alleged influence peddling and grifting that have rightly enraged folks.  But such things should be taken in stride at least while the events are taking place, and Indians did just that.  And now that the games are over, we will see whether there will in fact be accountability and, if there is not, whether India's citizenry will demand it.  What comes out of this will be a minor defining moment for the country.

At the same time, however, those who predicted that the pre-games debacle would signal foreign investors to steer clear of India exaggerated their case.  While clearly there are lessons to be learned from these games, the India investment story is rather safely independent of the CWG issue.  The India investment case rests on many converging factors whose momentum won't be dislodged easily, prime among them India's demographic dividend.  I will write more about the impact of India's much discussed demographic dividend in a later post.  For now I aver that the hopeful national spirit revealed during the games was very much a reflection of the confident ambition of India's young.

And the negative investment case some tried to make by link to the CWG issue was not unlike other arguments made by India story skeptics:  that problems of terrible infrastructure, bureaucracy, corruption and grinding poverty make India a bad bet.  I've never been able to comprehend the validity of these arguments.  Look at the arguments from an inverse angle - in the absence of these problems India would be just another developed market.  There would be fewer risks perhaps, but the potential returns would be much lower also and the investment opportunity set would be limited.

There's no denying that these problems are barriers to growth, but (a) they are not insurmountable for India or for investors; (b) these problems are actually areas of investment opportunity (just take infrastructure, for example, where hundreds of billions are being spent); (c) public policy and management is improving, albeit slowly, viewed over a long time horizon; (d) on a comparative basis, the India investment case is superb; (e) growth is lifting people out of poverty and India's middle class is growing quickly.

The India growth story is not based on luck.  The demographic dividend is fueling significant growth in the labour force, which is contributing perhaps 4% annually to GDP growth and this will continue for decades.  But a demographic dividend alone is not sufficient to cause growth - governments, policy makers, business, labour and other leaders have to put in place the right conditions for growth to take advantage of a demographic dividend.  And this has happened in India through improving public policy towards trade, investment and other areas.  These changes in public policy have been implemented over a period of some 20 years and have taken firm root.  And that is why I call the CWG issue a minor defining moment - it will not rock the solid India investment case, but it may provide valuable lessons and impetus for action and reform to policy makers and other leaders, and the results will be seen and measured over the long term.

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