I strongly feel that the latest happenings will have its adverse affect on flow of foreign investment. And if it happens, this will be really devastating for the Indian economy, already reeling under slowdown.
The latest date shows that foreign investors (FPIs) are turning bearish on the Indian stock market and the Kashmir move may fuel the run. FPIs (Foreign Portfolio Investors) have sold shares worth Rs 2,000 crore after the budget on July 5 (presentation of the budget) showing a build-up of bearish bets in four-and-a-half months. FPIs were the net buyers for the past five consecutive months.
The lack of confidence in the markets and impending slowdown are being attributed to the prevalence of bearish bets. After all, the confidence building measures are a must for attracting foreign investments. India has already slipped in its ranking of 2019 Foreign Direct Investment Confidence Index. India's ranking has come down from 8 in 2017 to 16 in 2019. It improved marginally to 11 in 2018.
China is still better placed than India. China had remained on top on the Index from 2002 through 2012. Now U.S. has snatched the top position from China and is on top of Index for seventh year in a row despite president Trump wranglings. The business-friendly regulatory environment, skilled workforce, technological capabilities are U.S. Enduring appeal.
So far, India, with China and Mexico were the preferred destinations among emerging markets for the foreign investors. But, recent developments in India have created instability. Investors always dread instability and restrictive business environment in the market. The geopolitical tensions adds to to their fears. The recent happenings in Kashmir have escalated the geopolitical tensions with Pakistan.
Kashmir plays an important role in development settings of India. Its one of the leading global tourist destinations. It offers immense investment opportunities for adventure, pilgrimage and health tourism. Kashmir handicrafts are world famous and its traditional handicraft industry has emerged as a large industry.
Undoubtedly, Kashmir valley beckons investment from outside and if thrown open, it can drive India to PM cherished dream of $5 trillion economy. So far, the flow of FDI to Jammu & Kashmir has been muted. Cumulative FDI inflows during April 2000 to March 2018, were barely $ 6 million.
But, the big question is will investors come, given the geopolitical tensions? There is hardly any hope that "mischievous Pakistan" will let Kashmir breath in peace. Drum beatings on " One Nation. One Flag" can't prevent Islamabad from its nefarious designs in Kashmir. Alienation of people can't be arrested by mofussil measures . Each of the 50 states of America, has its own flag that co-flutters with the national flag. Hawaii’s flag even bears Britain’s Union Jack to represent Britain’s ‘historical relationship’. But. no state and its people have ever demanded session from mainstream.
Karnataka has its own state flag. A bi-coloured Flag of Karnataka was adopted by the state government on March 8 2018. Till then only Jammu and Kashmir had a state flag. Now BJP govt is ruling the state.
Growth only needs open environment and confident of investors in the system. Even Prime Minister Modi has admitted this in his ID address. Kashmir only needs growth and big investments. All other things will follow.