The Murder of Growth- Part 2

In my last blog which is a prequel to this one, I wrote about how Mr. Nehru and his socialist principles led the economy of this nation to a fully blow debacle. I received various feedbacks on the same, mostly converging to the argument that my dissertation was mainly theoretical and not political. People are right if they expected me to address political issues too when I talked about the failure of a federal government. Some also argued that 1962 war with China and our miserable defeat in the same gave a major blow not only to this country’s economy but also to its self esteem. I agree that China war was a disaster, but its seeds were grown over a decade before it actually happened, most important of them being 1959 Tibetan uprising which Nehru govt supported and issues over Himalayan borders near Sikkim which was not a part of India then. (Sikkim was under the suzerainty of India, which controlled its external affairs, defense, diplomacy and communications, but Sikkim otherwise retained administrative autonomy. It became an Indian state only in 1975.) While Indo-Chinese war per se could a subject of another blog, it certainly isn’t the excuse with which Nehruvian government could vindicate itself. Our economy could have been saved despite the war, but it wasn’t. The point here is that I did not focus on politics in my earlier blog as Nehru never experienced any vote deficit. He was at the helm of Congress party which literally ruled the country unequivocally at his times, thanks to people’s belief that Congress got this country free from British rule. No political crisis occurred in his era and so, it can be said that all policies he advocated were free from any political pressures or majority-deficit encumbrances. The political crisis came in his daughter’s era and hence, this blog is completely political !!

While I can’t say that I am against Indira Gandhi (IG), I must purport that blunders in economic policies continued in her era too. By the time she became PM in 1966 following death of Lal Bahadur Shastri (LBS), Congress was already split in two factions, the socialists led by IG and the conservatives led by Morarji Desai. The internal problems showed immediately in the 1967 election, where Congress lost nearly 60 seats winning 297 seats in the 545-seat Lok Sabha. IG had to accommodate Desai as Deputy Prime Minister and Minister of Finance. In 1969, after many disagreements with Desai, the Indian National Congress finally split. She ruled with support from Socialist and Communist Parties for the next two years. The fundamentally socialist upbringing by her father and her complete political dependency on leftists at the very beginning of her political career made its due impact on her mind and our country started racing, not walking, towards becoming a soviet clone.

The results started showing almost immediately. Her government issued an ordinance ('Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1969') and nationalized the 14 largest commercial banks in the country with effect from the midnight of 19 July 1969. These banks contained 85% of bank deposits in the country. Jayaprakash Narayan described this step as a "masterstroke of political sagacity”. I am currently reading one Nani Palkhiwala’s book called ‘We, The Nation’ where he argues that ordinances are to be used only as an exceptional last resorts when the legislative assembly couldn’t function properly. However, IG used these ordinances as her routine lawmaking tactic, challenging the Indian constitution itself. A second dose of nationalization of 6 more commercial banks followed in 1980. The stated reason for the nationalization was to give the government more control of credit delivery. With this second dose, the government controlled around 91% of the banking business of India. Can you imagine? 91% of the nation’s economy being controlled by a single person!

The period of 1967–75 was characterized by socialist ascendency in India which culminated in 1976 with the official declaration of state socialism. IG not only abandoned the short lived liberalization program started by LBS but also aggressively expanded the public sector with new licensing requirements and other restrictions for industry. She re-launched the Five-Year plans in 1969, which were stalled by LBS to start damage control by focusing on annual plans with micro-planning. Having been re-elected in 1971, Gandhi proceeded to nationalize the coal, steel, copper, refining, cotton textiles, and insurance industries. During the 1971 war against Pakistan, foreign owned private oil companies had refused to supply fuel to the Indian Navy and Indian Air Force. In response, IG nationalized oil companies too in 1973. After nationalization, the oil majors such as the IOCL, HPCL and BPCL had to keep a minimum stock level of oil, to be supplied to the military when needed. Gandhi claimed that only "clear vision, iron will and the strictest discipline" can remove poverty. If at all there is someone who still doesn’t see this as socialist, let me tell him that she also signed the Indo–Soviet Treaty with Soviet Union in August 1971, which was in stark deviation from India's previous position of Non-alignment in the Cold War.

On 12 June 1975, the High Court of Allahabad declared IG’s election to the Lok Sabha void on grounds of electoral malpractice, since it was held that she misappropriated government funds for her election expenses and campaigning. The court thus ordered her to be removed from her seat in Parliament and banned her from running in elections for six years. Since a PM has to be a member of either Lok Sabha or Rajya Sabha, this decision effectively removed her from PMO. She refused to resign and expressed her willingness to challenge HC order in Supreme Court. Nationwide protest movements started following her autocratic leadership. IG govt recommended then President Fakhruddin Ali Ahmed to declare a state of emergency, which he immediately declared on 26 June 1975. What an obedience! Within a few months, President's Rule was imposed on the two opposition party ruled states of Gujarat and Tamil Nadu too, thereby bringing the entire country under her direct control. Now she could do anything!

Police were granted powers to impose curfews and indefinitely detain citizens. All publications were subjected to substantial censorship by government. Impending legislative assembly elections were indefinitely postponed, with all opposition-controlled state governments being removed by virtue of the constitutional provision allowing for a dismissal of a state government on recommendation of the state's governor. President Ahmed also issued ordinances that did not require debate in the Parliament, allowing IG to rule by decree. Rule by decree allows the ruler to arbitrarily create law, without approval by a legislative assembly. So, it’s not new for this country that the President is henpecked by the head of Congress party. As if this analogy is not good enough for someone to know whom I am talking about, let me give one more similar analogy. IG openly favored her son Sanjay, who had no qualifications or credentials to satisfy the needs of the offices he headed. In 1971, when IG govt proposed the production of a "People's car"—an efficient indigenous automobile that middle-class Indians could afford, Sanjay was awarded the contract and the exclusive production license though he had no experience, design proposals or tie-ins with any corporation. I wonder how many know that ‘Maruti’ company was Sanjay’s foundation. Even while he had not been elected and held no office, Sanjay used to exercise his influence with cabinet ministers, high-level government officers and police officers. In one famous example, I. K.  Gujral resigned from the Ministry of I&B when Sanjay attempted to direct the affairs of his ministry and give him orders. He was promptly replaced by V. C. Shukla who was Sanjay’s confidant. In another incident, after popular Bollywood singer Kishore Kumar refused to attend a function of the Indian Youth Congress, his songs were banned on All India Radio upon Sanjay's insistence. Look who’s ruling the country!

IG, being the ultimate ruler, shackled Indian economy further by undertaking a massive redistribution program. The provisions included rapid enforcement of land ceilings, housing for landless laborers, the abolition of bonded labor and a moratorium on the debts of the poor. Lenin did the same in Bolshevik Russia. Stalin did the same in Soviet Russia.

In 1977 elections that followed emergency, Congress party was crushed totally. Indira and Sanjay Gandhi both lost their seats, and Congress was cut down to 153 seats (compared with 350 in the previous Lok Sabha), 92 of which were in the south. Janata Dal claimed victory and came to power. But a seasoned politician by now, IG knew her way out. When the new govt ordered for her arrest on the charge of planning a conspiracy of killing their leaders in jail during emergency, she gave so melodramatic speeches that people almost forgot that this was the same lady which once ruled them mercilessly. She knew very well that Janata Dal govt was multi-aided and could tumble at any time giving her a chance to reclaim what she had lost. Her arrest and long-running trial gained her great sympathy from many people. Soon, the differences amongst the leaders of new govt surfaced and Desai resigned in June 1979 as PM after Charan Singh and Raj Narain formed their own breakaway party. Charan Singh was appointed Prime Minister, by President Reddy, after IG promised him that Congress would support his government from outside. Just after a short interval, Congress withdrew support and President Reddy dissolved Parliament in the winter of 1979. Before the 1980 elections, IG approached the then Shahi Imam of Jama Masjid and entered into an agreement with him on the basis of 10-point programme to secure the support of the Muslim votes. In the elections held in January, Congress was returned to power with a landslide majority. Shrewd, isn’t she?

Her audacity went on increasing after this victory and she even challenged the global leaders as well. I remember reading in a biographical piece on Richard Nixon (US president 1969-74) that he used to call her “witch”. During 1971 Bangla-war when US openly supported Pakistan and mobilized their seventh fleet of navy (incl. USS Enterprise, the longest naval vessel in the world) to Indian ocean, Indian bureaucracy started shaking legs and Indian media started advocating govt to begin talks with US, but IG wasn’t moved a bit. She flew to Russia, talked to Brezhnev, Russian Premier, and declared from Moscow radio only that India was not afraid of US navy and was ready to fight. Within 2 days, Russian navy came to Indian seas armed with nuclear missiles and US immediately retreated. Nixon later wrote- “this woman suckered us”! With the same impudence, she went ahead with Operation Blue Star which finally turned back on her and she was assassinated by her sikh bodyguards in 1984.  Her politically ambitious son Sanjay had already died in a plane crash in 1980 and his younger brother Rajiv, a passive guy who otherwise would have pursued his aviation career as a pilot, came to power. India got its youngest and best looking prime minister ever!

Rajiv did try to liberalize the economy and commenced reducing the restrictions of license raj. He also brought onboard Sam Pitroda and paved the way of Indian telecommunication revolution, which was an amazing achievement and he deserves full credit for that. But, after reading Rajiv’s biography, I am of the opinion that he was still naïve to understand economy and instead tried to become larger than life character. He was a professional pilot and his ambitions too weren’t any lesser than horizon. Instead of totally focusing on what he had started rightly, he again resorted to traditional five-year plans, delegated the administrative functions to his confidants and himself plunged into world politics. Sri Lanka was his special attraction!

This small island was extremely delirious for both US and USSR, due to its strategically important geographical location in Indian ocean. Rajiv initially succumbed to political pressure from his south Indian alleys and supported LTTE and set up camps in India to militarily train the LTTE extremists to make them able to fight with Lankan army. He was of course persuaded by Russia for the same, as Sri Lanka could have been a good military base for Russia as an answer to US owned island Diago Garcia in Indian ocean, where US had placed their nuclear missiles having capacity to hit any major city in Asia. For this favor, Rajiv received regularly huge moneys from Russia and KGB. After his death, in 1992, two Indian newspapers, Times of India and The Hindu, had published reports alleging that Rajiv Gandhi had received funds from the KGB. The Russian government confirmed this disclosure and defended the payments as necessary for the Soviet ideological interest.

However, soon Rajiv understood that things had started slipping out of his hands, as LTTE became too powerful and went out of his control. Western countries including UK and US started directly providing arms and ammunitions to LTTE to turn it against India. Rajiv tried to regain supremacy by military action on LTTE rebels. Indian army intervened with full force in 1988 Maldives military coup and helped Maldives army to gain control over LTTE sponsored fundamentalists. Also, Rajiv deployed Indian Peace Keeping Force (IPKF) to Sri Lanka to restore order and signed a pact with Lankan govt, ordering militants to surrender weapons and come for a political dialogue. RAW had completely underestimated LTTE’s power, which later killed Rajiv in 1991 during his election campaign in Tamil Nadu. I was shocked to learn that his killers had taken their military training in RAW’s Nainital camp during the time India supported LTTE.

Following Rajiv’s death, India got its most economically prudent prime minister - P V Narsinha Rao. As per me, he is the best Prime Minister of India (in terms of his contribution to national economy) till date and I would rank him even above A B Vajpayee. It’s his misfortune that Babri Masjid demolition happened during his tenure and Congress made him sacrificial lamb to save party’s face, otherwise he would have been given due credit for 1991 economic reforms that transformed the socialist economy of this country into a meaningful, competitive and efficient economy. Some coin this paradigm shift as capitalistic, but I would say it was a controlled liberalization, just the way it was necessary at that time. He was the man who literally carried Congress on his shoulders for 5 years after Rajiv’s death. But Congress is such a mean organization that it did not even allow Rao’s body to be taken inside AICC building, after his death in 2004.

1991 happened, Manmohan Singh took the credit, our economy survived and this nation was saved from the ignominy of bankruptcy.

…and we are back to 1991 again today !!

The Murder Of Growth- Part 1

This is an intensely economic blog and represents my personal views based on some amateur reading out of academic interest. It’s not a ‘copy-paste’ at all, but it is ‘find-note-arrange-rearrange’ at places. It goes against Jawaharlal Nehru mostly and is based on analytical facts, not on perceptional hindsight. Basically it's about Nehruvian Socialism that failed to uplift the most diverse democracy as the way it was purported to do. My expressions could be fundamentalist, but thoughts aren't so necessarily.

With the recent backdrop of tumbling Rupee against American and European currencies, most of the economic portals paid remembrance to FY 1991 when India was on the verge of default on the BoP commitments and foreign exchange reserves had reduced to the point that India could barely finance three weeks’ worth of imports.  Yet, the stark difference in both situations is that Rupee was pegged to the value of a basket of currencies in 1991 and wasn’t freely tradable, whereas in 2013 this isn’t the case and our economy is now much more liberal to allow externalities have their due impact on currency pricing. While reading about 1991 crisis, one will come across the term ‘end of license raj’ often, which seduced the inquisitive reader inside me to delve more into it. As I went on reading, I had some fascinating manifestation of the gross blunders made by Mr. Jawaharlal Nehru (JN) during the first two decades of our independence, that have mostly resulted into all the subsequent mess this country has gone through. This blog is just an attempt to highlight some of the key facts and may interest only those who felt it interesting reading so far. Others may please go back to Facebook!

Not many of us know much about the name Ms. Annie Besant (AB). She was once a president of Indian National Congress during its initial years and chief mentor of JN. Both AB and JN were members of the club ‘Fabian Socialism’, which openly sponsored communist manifesto. AB writes in one of her memoires- “A democratic Socialism, controlled by majority votes, guided by numbers, can never succeed. A truly aristocratic Socialism, controlled by duty, guided by wisdom, is the next step upwards in civilization.”  She highly influenced JN’s thoughts towards adoption of socialism. Mr. Clement Attlee, British PM 1945-1951 who declared Indian independence from British rule, was JN’s friend and active supporter of Fabian socialism too, from whom JN was further inclined towards these theories. Labor Party came to power in Britain after WW-II defeating the war hero Winston Churchill and Attlee’s Pro-socialism policies made deep impact on JN’s mind, who had just started enjoying premiership of a nascent country.

At the doorstep of freedom, JN had two prominently established economic models to embrace for growth-1. The linear-stages-of-growth model- It posits that there are a series of five consecutive stages of development which all countries must go through during the process of development. These stages are "the traditional society, the pre-conditions for take-off, the take-off, the drive to maturity, and the age of high mass-consumption". 2. Structural-change theory- It deals with policies focused on changing the economic structures of developing countries from being composed primarily of subsistence agricultural practices to being a "more modern, more urbanized, and more industrially diverse manufacturing and service economy."

JN embraced the first one, perhaps because it sounded so nice! JN was a man of dreams, yet his dreams often lacked rationale and concrete planning. He was a fairy-tale visionary. The anti-agricultural stance of structural change (SC) theory disheartened his hardcore socialist soul and he chose to sacrifice the necessity of urban and industrial development for building of a nation. Of course there were certain shortcomings in SC theory too such as incorrect assumption of surplus labor throughout the year that can be shifted from villages to cities for other deployments, whereas surplus is only a seasonal phenomenon in India. Yet, it was still constructive in fundamentals than the 1946 Harrod–Domar model that JN embraced for The First Five Year Plan (1951-1956). It argued that production required capital and that capital can be accumulated through investment; the faster one accumulates, the higher the growth rate will be. It was a quantitative model, not a qualitative. So basically, it was like growth = saving! It failed to consider the basic reality in less developed countries that labor is in plentiful supply in these countries but physical capital is not. To fill this gap, it argued that poor countries should borrow to finance investment in capital to trigger economic growth; neglecting the overdue leverage that was imminent. The basic socialist requirements of this model such as land rehabilitation, development of agriculture and community might have attracted JN’s all the attention while adopting this theory.

This deficiency of H-D model was later corrected by Solow model, which brought in an important parameter to measure growth- the rate of technical advancement. It explained long run economic growth as a derivative of not only capital / saving but also of productivity, capital accumulation, population growth, and technological progress. In Solow's model, new capital is more valuable than old (vintage) capital because—since capital is produced based on known technology, and technology improves with time—new capital will be more productive than old capital. Unfortunately Solow model came in 1956 when First Five Year Plan had already succumbed to H-D fantasies.

It’s interesting to note that both H-D and Solow are ‘Exogenous’ growth theories purporting that externalities stimulate growth prospects. Later developed ‘Endogenous’ growth theory holds that economic growth is primarily the result of endogenous factors such as investment in human capital, innovation, and knowledge. Here, households are supposed to maximize consumption (part-1) and industries are supposed to maximize profits (part-2), while crucial importance is also given to new technologies and human capital. It’s indeed leading towards a balanced and sustained growth in long run. China has followed its part-2 so far by promoting the exports, but they haven’t taken care of part-1. That’s why economists want China to increase its domestic consumption to maintain its growth, which after a long march in double digits has now slipped into single digit.

Well, coming back to JN, of course his gamble failed in First Five Year Plan. So, JN turned to a budding new socialist economist- Mr. P. C. Mahalanobis. He had developed a new growth model called Feldman–Mahalanobis model together with Soviet economist G. A. Feldman. The essence of this model was a shift in the pattern of industrial investment towards building up a domestic consumption goods sector. It suggests that in order to reach a high standard in consumption, investment in building a capacity of production of capital goods is firstly needed. A high enough capacity in the capital goods sector in the long-run expands the capacity in the production of consumer goods. This model had some very fundamentally wrong assumptions- most important being considering India as a “closed economy” where it’s assumed to be self-sufficient without any import-export. Also, investment was considered to be determined by supply of capital goods only. Other sources of capital such as tax, public saving etc. were not considered at all. Yet JN loved it, as it still didn’t ask for private industries! Second Five Year Plan (1956-1961) was built on this model and Result? State owned, operated and controlled means of production in key heavy industrial sectors, discouragement to Private activity and entrepreneurship through regulated permits, nationalization of economic activity and high taxes.

There was one lone warrior in Congress who vehemently opposed to JN’s anti-national and pro-communist policies. His name was C. Rajagopalachari (CR). When JN perceived Hindu Mahasabha to be the greatest threat to the nascent republic, CR openly held that the Communists posed the greatest danger. He parted away from Congress eventually and founded a new ‘Swatantra Party’ in 1959. CR is the person who coined the term ‘license raj’! His party opposed the Nehruvian socialist outlook of the Congress Party by advocating free enterprise and free trade and opposing the license Raj. Referring to CR, Sarojini Naidu, who was never on good terms with him, had once remarked- “the Madras fox was a dry logical Adi Shankaracharya while Nehru was the noble, compassionate Buddha”. However, as the fate would have it, Congress reined the power nevertheless and India craved for growth endless.

Third Five Year Plan (1961-1966) was an utter failure owing to two main reasons- first being fundamentally weak base for economy due to failures of earlier two plans and second being two back-to-back wars with China in 1962 and with Pakistan in 1965. The target growth rate was 5.6%, but the actual growth rate was 2.4%. Due to miserable failure of third plan, the government was forced to declare "plan holidays" (1966–67 and 1968–69) and customized three annual plans during this intervening period, thanks to the bold decision of Mr. L. B. Shastri (then PM), who had courage not to blindly embrace JN’s posthumous fanciful ideas. In these annual plans, equal priorities were given to agriculture as well as industries and the first constructive step towards private industrialization was taken during this period. It seemed to collect the scattered pieces of economy gradually, but again fate didn’t allow it. LBS died in 1966 and the power came back to one more socialist leader- Indira Gandhi !!

Well, Indira was per se a historic and larger than life personality. She wasn’t fanciful like her father, rather she was too solid for a woman. She was like an immovable object, which will deflect an unstoppable force but won’t move an inch! But in her heart, she was purely socialist and believed in ‘stalinization’ of nation rather than ‘liberalization’. I will try to give an account on further nosedive of Indian economy till the time of being on the brink of bankruptcy in 1991 in the next part of this blog. I just have started writing it and I am doubly excited to write about Indira, whom I really respect as a leader of substance despite many differences of opinions. It takes guts to control this country single handedly for 15 years. Before Rajiv tried to consolidate the economy in 1985, it had taken many blows already under the dictatorship of her mother. Let’s review the same in short while!

Till then, my hands rest and arms open for comments.

Spot fixing- clueless or shameless?

Before the jaws drop at the idea of ‘how can a spot fixing be clueless’, let me put a disclaimer that this is not about the (in)famous cricket spot fixing scandal in which some idiot cricketers earned money and lost careers. This is about the whole confounding and entangling scam around the recent NSEL (National Spot Exchange Ltd) debacle which brought down not only FT (Financial Technologies- NSEL’s parent company) shares but also sensex and whole market. It’s been more than a week to the event and still market hasn’t recovered. I am since then trying to be inquisitive about what could be the exact relation between the scams and sensex and believe me, the deeper one digs, the clumsier it becomes!

For those who are unaware of what exactly went wrong in NSEL, it can simply be put like this- Being a spot exchange, NSEL is allowed to sell short term forward contracts of underlying commodities. When MCX (Multi-Commodity Exchange) was founded by FT promoter Mr. Jignesh Shah, his entrepreneurship was lauded and it really made sense at that time, since commodities remained really undervalued till MCX was launched. Then, to increase liquidity and volatility in commodity market, FT established NSEL to sell spot futures with the max. contract period of 11 days. But NSEL unduly  exploited the leverage and went on selling dual forward contracts, one short term and one long term, on the same commodity- say one with T+2 maturity and the other with T+28. Now, an investor could take a long position on T+2 contract and simultaneously enter into T+28 contract with short position, pledging the underlying commodity which never came into his custody. The difference between these two contracts stood around 15-18%. This means the investor would have typically 18% RoI in a month’s time, that too in a highly liquid market. The basic purpose of a spot commodity exchange was to promote commodity pricing to bring the markets to a supply-demand-speculation equilibrium. But with above trading, this basic purpose itself got defeated as these instruments were rather used as short term money making instruments. The fact that you could enter into long term forward contract without actually possessing the underlying commodity enabled the money laundering sharks to circulate oodles of money again and again through the process by rolling over. Typically, the borrowers (purchasers of forward contracts) would be the businessmen (mostly real estate) who were in need of money for short term, who got it in above way for a scanty 15-18% cost of capital, whereas the investors (buying T+28 contracts) were happy too since no other product in the market would give guaranteed 18% returns in a month’s time.

Does this ring any bell? Seems like heard somewhere earlier too? If you feel so, I am thankful that there are others too who got the same doubt. Only 5 years ago, when Lehman Bro. went bankrupt over sub-prime lending crisis and it had a domino effect of pushing the world into a deep financial crisis, something similar happened, didn’t it? Prices soared even when the underlying asset (house price in 2008 crisis) had no material appreciation only due to unethical speculators and shameless rating agencies vindicating these sensibly illogical products as “highly recommended”. My grandfather used to say- “promise something to someone only if you have it”. It seemed like an average-intelligence common sense at that time, as any sane person would know it. But I guess limits of sanity vanish in thin air as you grow bigger in financial market.

Why to go to USA actually looking for a reference? Take our own country and our own Bombay Stock Exchange for example. In 1992, before Sucheta Dalal exposed the scam, Harshad Mehta and Ketan Parekh also did kind of similar things. Harshad Mehta brokered for the “ready forward” deals between two banks or two parties, wherein instead of earning commissions of thousands of rupees, Mehta embezzled crores of rupees into the market and artificially blew the stock prices out of proportions. All it took for him to get hands on counterfeit BRs (Bank Receipts) which he could exchange with lending banks while purporting to be brokering for an invisible borrower pledging the BRs and voila! He could get truckloads of cash in return. Well, ‘how’, ‘why’, ‘when’ are the questions only for innocent investors like you and me who invest in market believing in its potential to reflect the true economy. For the financial institutes out there who are the trustees of our money, it’s all about getting maximum leverage and pouring in the excess leverage again into the market so as to burgeon their balance sheets and turnover figures. None cared to carefully verify the authenticity of the BRs being traded. Result? Yes, Mehta and Parekh did go to Jail and then chairman of Vijaya Bank did commit suicide fearing the ignominy, but who actually burnt their fingers? It was us, the public, who invested in good faith and are still visiting courts to get their money back, even after 20 years.

Let me come directly to the point before someone starts thinking about it as an outcry of a chronic loser who has lost money in the market due to NSEL/FT/MCX crash. Well, I am not much leveraged into stock markets and have hardly tried my luck so far in F&O, the only reason being lack of risk appetite. Here, my point is only to make out that people indeed know what they are doing before something like this goes wrong “suddenly” and then a chaos spreads. We loved the Joker in ‘The Dark Knight’ and some of us even clapped in theaters when he said- “I am an agent of chaos”. But some of us are indeed agents of chaos, as they keep on wrongdoing while knowing it for sure that it’s going to go haywire someday. We have so many regulatory bodies who are supposed to look over the operations of market movers so that scams and scandals are kept from happening. Frankly, SEBI & CCI have been indeed doing well in this regard, but when it comes to derivatives markets, FMC still seems like either a toothless tiger or a headless elephant to me. Regulatory authorities should really be conservative, however unfair it seems to market prosperity. What we need is a sustained and pragmatic growth, not a frenzied and ephemeral one! Western models of promoting market prosperity have been proven wrong again and again so far and the think tanks in these countries are now contemplating over the austerity measures. Some of them are believed to be in touch with RBI to teach them ‘control’. I wonder if they will change their minds after seeing how RBI “controlled” the rupee recently.

Govt. is still speechless when the press asks- why FMC was sitting over the decision of NSEL procedural short-comings which were spotted at least a year ago. Are these decisions also “timed” perfectly? Did someone influential say in a high-level FMC meeting -“ hey, let’s wait for a downward spiral of sensex and only then ask NSEL to stop spot trading and settle the outstanding contracts first. By that way, it will cause less harm.” So, meanwhile, the clueless investors may continue investing and the shameless onlookers may continue having fun watching them.

I am sure every one of us has asked himself/herself this question at least once in a while- “is the sensex true reflection of market potential or economy?” The real question is how many of us got a convincing answer to this question. 

And our beloved finance minister quotes- “people buy unnecessary gold, which widens CAD and rupee so depreciates.” So folks, it’s us who are responsible for everything, not the government!

But there is a point in FM’s quote, however illogical it may be. We should really stop buying gold, as we have to have some reserve cash to buy onions J J