Why Not Mobilise Domestic Savings To Build Infrastructure

Indian equity markets and especially the frontline indices have not done quite well in last one year and one of the reasons for this, may be that foreign smart money has moved out of this space in the second half of 2015. Nevertheless, this is not the case when it comes to unlisted space and start-ups, where the valuations have definitely rose during the same period as well as foreign money has also poured in. Say for instance, valuation of Flipkart, an e-commerce company, saw it climbing up by 50 per cent in the first six months of 2015 to USD 15.2 billion or Rs 98,800 crore. Similarly another e-commerce major, Snapdeal has witnessed its valuation also rose to USD 5 billion in August, up from USD 1 billion in May 2014. Since these companies are unlisted, these valuations are arrived at after their recent round of fund-raisings. In terms of attracting funds, after raising almost USD 5 billion in 2014, start-ups in India raised almost USD 7 billion this year. Most of these funds have come from global investors.

The union government too has recognised the importance of these start-ups for our economy. The fact that our Prime Minister Narendra Modi, while addressing the nation on the 69th Independence day, announced a new campaign ‘Start-up India, Stand up India,’ to promote the start-ups, proves the point. To reinforce its commitment towards creating an enabling ecosystem wherein these start-ups can grow, the government is set to unveil its action plan on January 16, which will be attended by CEOs and founders of top start-ups (over 1500) from across the country. This will go a long way in boosting the entrepreneurship and creating job opportunities in the country. India is at cusp of change and has unique advantage of having a young demography. However, this demography may become a bane for the progress of the country instead of boon if we do not utilise and channelise this demography in right way. Therefore, events like this will definitely help us giving right direction and realising our true potential within India, as we see many MNCs are headed by persons of Indian origin or Indians.

Besides, this government is also committed to improve physical infrastructure of the country. Recently it has announced various new projects such as laying foundation stone for 14-lane Delhi-Meerut Expressway, which is likely to be completed in 30 months. In the absence of serious commitment from private players for whatever reasons, government has been trying various innovative ways of funding these projects. For example, National Investment and Infrastructure Fund (NIIF), a fund has been created by the Government of India for enhancing infrastructure financing in the country. NIIF is meant to fund development of infrastructure projects, including reviving stalled ones. The government will invest Rs 20,000 crore into the NIIF from the union budget, with another Rs 20,000 crore expected to come from private investors. Recently union finance minister, Arun Jaitley updated that ‘several sovereign funds and pension funds from abroad are willing to participate in the fund and cooperate with NIIF at various levels.’ This creation of NIIF is one of the major initiatives taken by the Modi government to fix India’s infrastructure woes.

I believe that in addition to the international funds, the domestic savings can also be mobilised to create infrastructure. In last couple of years we have witnessed a huge amount of domestic saving being channelized into mutual funds. In 2015 domestic mutual funds purchased shares worth an over Rs 70,000 crore, primarily on account of strong participation from retail investors. This dwarfs the investment made by Foreign Portfolio Investors (FPIs) whose net investment was just Rs 16,674 crore during the period. The support from mutual funds helped India to outperform other emerging economies market.

Our cover story this time talks about the equity linked saving schemes (ELSS) which are also known as tax saving mutual funds. We have also recommended five best tax saving mutual funds.

In one of our special report this time we have covered the dairy sector. The reason being lot of activity is going on the sector such as IPO and investment by PE investors. This report will help you to identify the factors that are acting as growth enablers for this sector and which are the companies to look for. We are also introducing Capital Column, a new feature which will help you to stay connected with the national capital.

Hope this issue will help you in spotting the right ELSS for investment. Please share your feedback on comment@dsij.in.