The Hindu Business Line : Some more headroom likely for bulls

Ms Roopa Purushothaman, former executive director of Global Economics group of Goldman Sachs and co-author of its BRIC report, was trifle embarrassed when she was asked in 2004 in Mumbai whether the timing of publication of the report was designed to boost the "India shinning" campaign, then in full bloom. Nevertheless, she aired her concern over the reach and quality of secondary education in the country and thought the predictions of the report may go awry if such key challenges are not adequately addressed.

Dream run

The report rolled out a dream, which caught the imagination of the global capitalists. Evidently, much of current interest in Indian equities was generated by the report. Nevertheless, the report had several riders. The report had stated that there was a good chance its projections may not be met, either owing to bad policy or even bad luck.

The report also had predicted that though India would be among the three largest economies of the world by 2050, her per capita income would still be low.

Now in India in a different avatar (she is mapping a cultural consumption trends and behaviour to chalk out retail strategies for an Indian group), this Yale University alumni and major in ethics, politics, economics and international studies still feels that compelling demographics and solid macro fundamentals are fuelling interest about India.

Interestingly, this time she is, perhaps, out to prove how market economy can extend the consumption base through a retail experiment - putting up specialised kiosks for the urban poor, in places such as Dharavi, Asia's largest slum.

Economy of politics

But, Dalal Street, of late, appears increasingly cagey about the rich-poor debate. Market intelligence suggests a widespread apprehension over a possible dramatic change in political direction to economy in the near future. The movement in the key indices in the last few weeks, if anything, suggested lack of conviction in adding valuations.

Since the external factor-driven correction in February, the stock market has almost recovered its lost ground.

Correction?

But, market insiders feel, another round of serious correction may not come before the onset of a monsoon-led euphoria in the next couple of weeks. Some strategists seem to suggest that there are still some headroom left for the market before it opts for a near-term correction.

However, the possible correction may be an embarrassment for the economy managers under a lengthening shadow of the aam admi.

Incidentally, there is complete absence of clarity about the definition of a common man. Is he on the wrong side of the poverty line or a Punjabi farmer, who is ready to spend Rs 10 lakh to send his son abroad through a tout?

Or is he a Mumbai taxi driver, who had lost his money in stock market in the 90s? Or is he a Singur farmer, who has hanged himself reportedly for not being able to come to terms with loss of his land for industry?

Warning call

The BRIC report had warned that an unstable macro environment could hamper growth and, by implication, slowdown investment flow. The current posture of the political establishments over the issue of economic growth, including its political cost and limited reach of its benefits, may be indicative of an impending dominance of political economy over the market economy.

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