It was just a question of time before he would say it too – and he didn’t disappoint. Raghuram Rajan stated that “the fundamentals are strong”. That phrase is used more often in economic-political discussions and interviews than “Jaanta hai mera daddy kaun hai” is used in Delhi or “They are Maoist agents” is used in Kolkata or “The spirit of the city…” in Mumbai or “Die sickular scum” on Twitter.

So, what are fundamentals? I’ve always wondered because as we know they are strong and everyone keeps telling us that. So strong in fact that we have a rap song below made with “strong fundamentals”.

We set out to discover what these fundamentals are, so we know what is being spoken of when we hear the phrase again. Here is what we found after speaking with very accomplished economists, investment managers, public policy advisors, professionals and intellectuals.

Surjit Bhalla, Economist and columnist

Fundamentals of any economy can be defined in terms of investments, skill development and productivity of labour force and the education of its population. 

Harsh Mander, Social Worker and Writer

I feel that to evaluate the fundamentals of a sound economy we should be asking whether it creates the base for sustainable long-term economic growth, which is possible only when it brings a much larger population in, as actors in the growth story, as both producers and consumers.

According to me the real fundamentals of an economy should be the assurance of nutrition and good healthcare and social protection for all, involving public investments in both human and physical infrastructure, and measures such as the protection of small farmers. A well-nourished, healthy and educated labour force can contribute best to the Indian economy. More money in their hands will also create a greater market for goods and services, by greatly expanding the size of the Indian market. 

Shoma Banerjee, National Economic Editor,  Economic Times

The fundamentals of an economy are the basic tenets of an economy – and that is market and demand. Because demand will attract investors which in turn will help in reviving the economy. With the per capita income going up the demand will certainly go up which will push growth. Also a younger demography and judiciary are the other tenets of an economy. 

Arun Kumar, Professor, Centre for Economic Studies and Planning, JNU 

Fundamentals of economics are macro-economic variables such as current account deficit, inflation in economy, fiscal deficit in budget, rate of growth of economy, saving and investment rate in the economy.

Meera Sanyal, Chairperson,  RBS India Services & Foundation

According to me the fundamentals of any country’s economy reside in the nature of its people and their belief about the future.

The fundamental nature of the Indian people is that we are a hard-working, highly entrepreneurial, innovative, honest and generous people. 

As for our belief in the future – if we believe that the future of our children will be better than our own, then we will work hard, invest more, consume more (but also wisely), generate more income, generate useful occupation for ourselves and others, and save more – leading to a virtuous cycle of more investment, more prosperity and higher growth. 

I believe that the combination of these two things constitutes the Fundamentals of our economy. It is this combination that creates confidence and drives GDP growth, as also all the positive metrics around savings, investments, industrial, services and agricultural production etc.

Harsh Roongta, CEO – Apna Paisa.com

If I was to use just three terms to describe the fundamentals of economy it would be growth, job creation and inflation. This pretty much sums up the current fundamentals but in the longer run inclusive growth also needs to be accounted for as a fundamental. 

Nimesh Shah, Investment Banker & Managing Director – Fortune Financial

Fundamentals of economy are essentially the growth that industry can hope to achieve, robust and competitive manufacturing, lateral demand across the board and removal of infrastructural bottlenecks. All of this coupled with a population that is ready to spend and purchase constitutes the fundamentals of economy. 

Not much unanimity there. What fundamentals are, changes depending on whom you ask. And we haven’t even asked many others who we would have liked to. So when someone says fundamentals are strong and carries on from there, a hugely erroneous assumption is the axiomatic nature of “fundamentals”. Would it not help a viewer, an investor, a pop economist tweeter if people also clarified what according to him or her fundamentals are? So dear anchors, reporters and commentators, please clarify before you launch into the “fundamentals are strong” set piece, whether you are talking about – inflation figures (not great), Current Account Deficit (not too good), growth rate (erratic), rate of savings (decent), nutrition and healthcare (dismal) or inclusive growth (terrible), resilient spirit of Indian people (outstanding), industrial growth (erratic) or one of the many other fundamentals we have been introduced to.

In my pursuit of what fundamentals are, I ventured beyond the opinions above. The most convincing and logical “fundamental” if you really want to use that word to me has been – trust. That is one of the most important if not the most important fundamental, from what I gather. Trust or confidence that a contract will be honoured, the law will be followed, a rule will be set and regulation will be fair and not ad hoc and random.

Whether it was Myanmar scrapping a currency denomination leading to economic disaster (among other things), or inter-bank economic activity freezing up post-Lehman or the failure of cattle insurance in rural India, it was all because of a failure of trust. Hell, banking works on the very foundation of trust. Go give your salary every month or life’s savings to someone to safe-keep! Sounds bizarre no? Duflo and Banerjee too have demonstrated in Poor Economics that lack of trust makes everything from government schemes and insurance schemes to basic economic activity (private sector and public sector) slow down and sometimes even seize. It is the Fundamental of all economic and administrative activity.

The Vodafone retrospective tax decision got much flack because it would lead to an erosion of trust. The faith that a contract or rule can be disregarded and a new one put in place would make anyone nervous. So how much do you trust economic or administrative activity in your country?

Applied for a passport lately? Ration card? Special Economic Zone? Banking license? FIPB clearance? Government job? Commercial license? Entered into a lease or contract with the government or a connected private party? Are you sure the process will go through without – a bribe, recommendation, harassment, threats, begging or any other device you use to get stuff done in India? How strong are these fundamentals in your experience of engaging in economic activity of any sort in India?

Coming up in Signs Part 2 – what has the government done to ensure fundamentals remain strong?

Interviews conducted by Somi Das. For full text of interviews click here.