Many of those living in India will be feeling really thrilled after reading the headlines of the past few months. India winning the T20 World Cup, Mukesh Ambani supposedly overtaking the World’s richest man, Bill Gates to be the newly crowned wealthiest man in the world and the BSE Sensex soaring to stratospheric heights above the 20,000 mark! India seems to be shinning brightly as never before and many of us have never had life so good.

In the midst of all this mutual backslapping and bonhomie, let us try to analyse the reasons behind this growing confidence and resurgence.

What in real terms does the Sensex crossing 20,000 mark mean to the common man on the street? Will it only mean something tangible to the new super rich class of corporate honchos and IT geeks?

In the modern globalised era, the economics and therefore the lives and livelihood of most people in all the nations of the world are highly interlinked. This is similar to a gigantic chess game where some insignificant pawn in the corner of the board can sometimes assume tremendous influence way beyond its ordinary means to do so.

Ever since 1991, India has ceased to be a fringe player in the global power game and has steadily been moving to the centre stage.

All that this means is that if these companies were to issue additional shares then, and only then will they be able to get their hands on these dollars invested here.

This also implies that the US and other developed countries banks, mutual funds and insurance companies

etc, have enough confidence in the long term growth of the Indian economy so as to place their money over here and participate in India’s growth and growth.

Out of a total approximately close to $ 800 billion dollars of available surplus funds in these countries, about $25 billion has been invested in the Bombay Stock Exchange since February 2006, causing an unbelievable growth of India’s premier stock market by around Rs. 36 lakh crores. The investments by FIIs are not restricted to the BSE alone but also in the rapidly expanding real estate market in major Indian cities as well as the four metros.

The headline grabbing mergers and acquisitions spree of major Indian conglomerates has also been fuelled by the availability of these global sources of finance e.g. Tata Steel acquiring Corus Steel, UK to become one of the largest steel companies in the world.

When so much of dollars are being pumped into India, they have come to be converted to Indian Rupees to be of use in the Indian Financial System. Hence the demand for Rupees in the International Currency Markets has risen, thus causing a drop in the exchange rate of these two currencies.

This translates into a rude shock for India’s IT companies, who employees are already feeling the pinch through a reduction in the profitability of IT blue chip companies in the previous quarter due to higher wage bills. So we may say that they are victims of their own spectacular success.

To conclude, where does all this leave us as the common folk on the street? While the average person may not see the immediate tangible benefits, the overall fundamental health of the Indian economy continues to be good and prospects for future growth continue to be upbeat.

While many of us may still not be able to purchase a Ferrari, the average Indian family could very well see many of their long cherished dreams come true in the near future.

Mr. K.S. Koshy

Lecturer,

Dept of Management Studies.