Page 62 - Nuvama | IC Report 2023

• DE-GLOBALISATION • DEREGULATION • DEBT • DEMOGRAPHY • DEMOCRACY

Exhibit 2: 5.0
India enjoys
a high score US
on institutions 4.8
vis-a-vis peers Australia
4.6
UK
4.4
Log GDP per capita 4.0 China Mexico Brazil
4.2

3.8
3.6 South Africa

3.4
India
Bangladesh
3.2
3.0
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
Democracy score

Source: PEW, World Bank, Bloomberg,

A good example of how policy flip-flops shape investor sentiment is the crackdown on tech tycoons in
Investors regard a major, but authoritarian, EM. This has resulted not only in large wealth destruction, but also investor
policy predictability perception of the risk quotient of the country. Accordingly, investors regard policy predictability as the
as the single most single most important variable in investing. After all, capital is a coward and frets uncertainty.
important variable
in investing; after all, In this context, it is encouraging that India’s ranking on the Democracy Index has been improving—
capital is a coward at 46 in 2021 from 53 in 2020. Should India’s ranking continue to improve on the Democracy Index,
and frets uncertainty foreign investment into the country should pick up further especially given its other advantages of
low indebtedness, increased deregulation and a favourable demography—a unique combination
in today’s world.

Democracy dipstick: Short of markings?

Democratic ideals are in effect derivatives of basic human values. While India has come a long way
since its independence in 1947, it has not been a linear march towards a progressively democratic
state. The journey has been chequered with some lows—such as the Emergency of 1975. We argue
such incidents are far and few, and not the rule.

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