As the ‘Occupy Wall Street' agitation rages in the US spreading across the globe, the question in the minds of people here is when will the Wall Street bomb hit our own Dalal Street.
The US agitation is supposedly against the greed of the financial managers who seem to get hefty pay checks even as the economy reels under recession with lakhs of people losing jobs and homes. . The agitation has spread to other continents and is now at India's door step at Hong Kong. The situation in India could be different because Indian economy still seems to be ticking and the stock market has retracted from its highs. Still the interesting question is will Dalal Street come to the targeted like Wall Street.
In an interview to Business Line, Mr Dinesh Thakkar, CMD, Angel Broking, Mumbai, shares his thoughts on the US stir and whether it might spread to India. Excerpts:
The ‘Occupy Wall Street' agitation that started in the US weeks ago is at our door steps now . Do you think it is just time before it hits Dalal Street?
No. The possibility of an anti-capitalist movement such as ‘Occupy Wall Street' finding favour on Dalal Street is extremely remote. The Occupy Wall Street movement has a context of years of capital market excesses and high unemployment which finds resonance in the US and Europe due to their economic conditions. Caught between socialism and capitalism, India does not provide fertile conditions for mass resentment against capital markets.
What is that the Indian leaders should learn from the agitation and take steps to avoid it being repeated in India?
The genesis of Occupy Wall Street is the havoc created by the high priests of finance in their pursuit of growth on the real economy. The movement has strong sentiment but no alternate ideology or solutions rendering it more of a collective sulk than a constructive initiative. In a way it showcases the sentiments and frustrations caused by double digit unemployment, anaemic growth and the spectre of political slugfest bordering on brinksmanship which make citizens feel that their rulers are insensitive to their plight. Wall Street has become a soft as well as an easy target to vent the collective ire of people. While the excesses on Wall Street did cause damage to the real economy, they were not committed in isolation. The real economy did benefit in the short term when mortgage rates were very low and every American could afford a home at the height of the credit boom. There was no activism then to question the practices and warn about the longer term implications. Now that the tide has turned, there is disgruntlement. No society can have it both ways all the time and it is high time that the widespread revulsion towards these practices is channelled into constructive debate to evolve better alternatives. The lessons for all policy makers are to be vigilant to ensure that excesses are not built in the first place. Prevention is better than cure.
Do you think that the robust job growth in India will insure the country from such an agitation taking place in the country?
As the India (growth) story has been widely accepted and despite various challenges, the country trundles at around 7.5 per cent growth; job growth continues at a healthy pace snuffing out any cause for mass resentment. Almost a decade of 8 per cent growth has unleashed a wave of upward mobility across all socio-economic strata that neutralized popular disenchantment towards governments prevailing especially in the 70s, 80s and a better part of 90s.
Is it not the perception about excess pay in certain segments-investment banking, stock markets-when the overall economy is in deep trouble prevalent in Western economies not of any relevance to India? Do they not happen here?
Fat cat bonuses in turbulent times and also from troubled companies have enraged the conscience of the western world. Higher pay in investment banking has also come in for sharp criticism from the society. But was it not the promise of a free world, a value system that encouraged enterprise and merit and an ideology of a free market based on capitalism which every American was proud of in the not so distant past? If those were the lofty ideals on which a great nation like America or a continent like Europe was built, it certainly warrants deep introspection on the change in Wall Street perception. These factors are not yet relevant in India as the perception and role of Dalal Street in the lives of an ordinary Indian is marginal.
Is the low penetration of the equity markets in India a blessing in disguise in such circumstances?
Yes. The awareness about capital markets is low even among the educated Indians which makes it a non entity in their lives. So there is no- connect between an anti-capitalist movement and the daily grind of an aam-aadmi.
Do not Indian companies make such huge payout to investment/stock market experts as in the West? Or is the non-disclosure of such payments which has not put the masses against the Dalal Street?
The scale and scope of capital market activities in India is miniscule as compared to the West and so are the rewards. Retail investors are slowly warming up to the idea of good governance but the scale of the problem is not alarming enough for people to take up cudgels against the perpetrators.
Is the situation in India so different from the West that a similar agitation will not happen?
India is at the cusp of capitalism with large parts of it still intending to be socialistic. After 45 years of state led socialism and 20 years of hesitant capitalism, India is still trying to evolve a middle path. It is caught between unsustainable socialism and politically unacceptable capitalism leading to continuous and often animated debates among various stakeholders. India has its share of economic challenges pertaining to land acquisitions that are surfacing with alarming regularity. However with judicial interventions and a Land Acquisition Bill that is in the works, sanity will soon prevail in this area.
Is there any discussion, even informally, in the investment circles about the possibility of such an agitation coming to India. If so, what are your concerns?
There is no such banter in the investment circles in India. Even in the US, the investment community is part bewildered and part amused by the nature of these protests that do not have a concrete charter of demands or proposed alternatives.