Healthy capital cushion points to future growth

Any discussion of outbound investment from India must begin with the effects of the 60 hours in Mumbai last month. The psychological effect of such a devastating event and its commercial impact is all too familiar for those of us who lived through the 9/11 attacks in New York. But neither the cloud of diffused political violence nor the global credit crisis of 16 months has significantly deterred internal growth in India.

The immediate effects of the Mumbai attacks cannot be underestimated but the consensus on the long-term fundamentals of investments into and out of India continues to remain robust.

Although the increasing rate of foreign direct investment (FDI) into India is under siege, the country continues to attract capital searching for a growth economy. The Indian prosperity this FDI has fuelled, or benefited from, has also generated a sustained level of capital accumulation in India over the last 10 years. It should come as no surprise then that India Inc has a healthy capital cushion, even as alarms of liquidity constraints fill the air.

Waajid Siddiqui is a partner at New York-based law firm Hogan & Hartson. The firm has 1,300 lawyers in 28 global offices.