The Hindu Business Line : Markets: Much ado about nothing?

OTHER than Jawaharlal Nehru and Lal Bahadur Shastri - and we are going back almost 60 years and 40 years in time - one cannot think of any Prime Minister with as unsullied a reputation as Dr Manmohan Singh, when assuming office.

Expectations are naturally running high, especially with Mr P. Chidambaram as his Finance Minister. Mr Chidambaram had a stint earlier in the same portfolio in the United Front Government. So he is not new to economic policymaking, administration or the markets.

The latter seem to be sold on the BJP and taken its return to power for granted. Otherwise it is difficult to explain the crash in stock prices as the election results started coming in.

The market thinks the BJP is "proreform" while the Congress, dependent on the Communists for survival, will inevitably backtrack on reform icons such as disinvestment and privatisation.

But is there all that much difference between the two, even granting the Communists will have a significant say. Both West Bengal and Kerala are keenly wooing the IT sector.

Considering their desperate need to create employment, they have little choice but to open their doors wide to FDI, FIIs and anyone else who is willing to invest.

Certainly it is a Twiddledum-Twiddledee situation. There is going to be no qualitative change to warrant a complete rerating of India's economic prospects and the liberalisation process. In fact, the sooner the new Government and all future Governments call the bluff of the rookies manning stock market terminals and advising their foreign clients to sell, the better.

There are enough domestic savings, capital, resources and labour to meet our investment needs in infrastructure, industry and agriculture. The biggest icon of foreign investment, the Enron-promoted Dabhol Power Corporation, has turned out to be an object lesson of how not to promote foreign capital with excessive incentives at the cost of our fisc (not to speak of self-respect).

The fact is that it was the BJP which allowed foreign companies to delist and go private shrinking the universe of quality companies listed in stock exchanges. Instead, a really promarket Government would have made it obligatory for MNCs in India to offer their shares to the public.

The significant thing is that the "shining" sectors of the Indian economy - IT, pharmaceuticals and auto components have flourished in domestic and global markets not because of Government support (there has not been any) but purely because of their entrepreneurial and managerial excellence. They will continue to do so. In a sense, therefore, segments of Indian business will "shine" irrespective of who is or not in power. Neither the BJP nor Congress can claim any "ownership" of these success stories. And mismanaged corporates and business groups will continue to destruct capital and resources and shamelessly ask for support, subsidies and Corporate Debt Restructuring (CDR) packages, come the Congress or BJP.

The new Government's priorities should be clear: massive investments in physical (power, roads, water) and social (education, health) infrastructure, genuine asset creation (quality rather than mere quantity), autonomy for the public sector to enable it to grow and become global players, tax efficiency and compliance and debureaucratisation - slashing the layers of decision making and quickening the decision making process with inputs from sectoral specialists of unquestioned integrity (e.g., Dr M.S. Swaminathan for agriculture).

Sounds simple but obviously a tall order in our complex polity and country.

More Stories on : Financial Markets | Financial Scan | Politics

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Rupee extends loss; securities weaken

Kotak Mahindra Bank Q4 net doubles to Rs 21 cr — Proposes 1:1 bonus

Max NY in talks with banks to enhance distribution channel — Moots two-way equity participation

Markets: Much ado about nothing?

GTB seeks AP Govt's support for revamp

New GMs for SBH

BoI plans more ATMs in AP

`Deployment mix, strategy should give us maximum spreads'