| Published on 06-10-2007 In Business |
| Viewed 1307 times |
| Galloping Stock Market, Suffering Majority, Recipe for disaster |
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Written by
Nilotpal Basu |
Reacting to the dizzy heights that the sensex has climbed during the last ten days, the Union Finance Minster, P.Chidambaram, had a word of caution. He stated, "I do not think retail investors are entering the market at this level. I would advise them caution". It is simply unbelievable. The sensex peaked 17 k from 16 k within six trading sessions. This has broken the earlier record of 19 days when the sensex zoomed from 11 k to 12 k in March 2006.
However, Chidambaram does not appear unduly perturbed. He greeted the breakneck speed – "there is apparently a lot of interest from foreign institutional investors. Why should we not welcome it". And he is dead right. FII's have pumped in Rs. 14,639 crores (US $ 3.7 billion) in just five days after American fed cut interest rates by 50 basic points. The Daily Telegraph has reported that the rally of the Indian market has been facilitated by "record overseas fund flows at $11 billion for the year against a backdrop of sustained economic growth of over 9 per cent."
Obviously, this is celebration time for the Finance Minister. Because this is precisely what globalisation is all about. The principal role of capital now is not just deployment for production of goods and services; it is increasingly and disproportionately more towards investment for making speculative gains.
But who gains? Some of the top gainers are Reliance – companies belonging to both the Ambani siblings, Bharati, HDFC, L&T, Hindalco of the Birlas, Mahindra & Mahindra, Tatas, ITC and of course the IT majors – WIPRO, Infosys and Satyam. The incremental growth in the net worth of these companies in just a few days the sensex moved from 16 k to 17 k has been between Rs. 1500 crores to Rs. 6000 crores.
Generally, this has been the trend for the economy for the last few years. That is why India has witnessed the arrival of the first trillionaire of the country – Mukesh Ambani whose personal net worth is more than Rs 1,20,000 crores. Number of Indian billionaires has outstripped those in Japan. Even the number of Indians who own more than one million dollars have crossed a lakh.
But it is not just stocks-- there are other categories of assets, which are also increasingly becoming instruments for speculative investment. The real estate and commodities, particularly food grains have also attracted lot of speculative funds.
But what is the effect of all these? According to the National Commission for the Employees of the Unorganized Sector chaired by Arjun Sengupta around 77 per cent of India's population is earning less than Rs 20 a day. One need not be an economist and proficient in calculating the gini coefficient to measure the widening inequalities in the society.
Two most glaring areas will be sufficient to demonstrate the outrageously unacceptable situation of the lower rung of the Indian society who is consigned to the `lower depths' of human degradation.
The condition of the peasantry in the country betrays the sense of desperation.
Almost across the country the contagin is spreading. Yes the phenomenon of farmer suicides. The major brunt of the agrarian crisis is afflicting the growers of commercial crops like cotton, tobacco and spices or plantation crops like tea and coffee. The upward spiral of input costs – the slump in the price that they fetch in the market and the burgeoning burden of debt – mostly outside the institutional system from blood thirsty moneylenders – all these are becoming symptoms of this first decade of the new century but almost a rerun of the feudal overlordism which marked the colonial rule.
The Finance Minister, while he openly embraces the huge FII inflows, appears in contrast, tight fisted in bringing down the interest rate for our peasantry. And for these hapless farmers there is no other go but to approach moneylenders. There is also talk in the policy-making circles for legitimising and institutionalising the role of these moneylenders! Had a fraction of the concern expressed for liberalising the peoples' savings in the form of provident fund and pension for deployment in the stock market under private fund managers been shown, for creating some flow towards these people who snuff out their own lives, perhaps the country would have to worry less for the dwindling per capita foodgrain production.
The agrarian crisis and the consequent demand supply mismatch is creating the backdrop for yet another major problem that demonstrates the contrasting approach of the government. This is the area of food security. With the per capita foodgrains coming down continuously, the government policies have led to a disproportionate reduction in its own stocks. And consequently the foodgrains available for the public distribution system is coming down sharply.
The major liberalisation of the procurement procedures allowing the full play of the private companies in this activity is denying the public distribution system of its essential supply line. So, there is a situation where the public distribution system gets into a mode of continued dismantling. While this leads to a lowered level of food security, stocks and more importantly futures are available for trading across the counters in our commodity markets. The financial market players make a killing, while the Vidharbha farmers continue to commit suicides.
The brunt of the situation has also come to plague the urban poor and the middle classes. While the inflation is down to 3.23 per cent – lowest in the last two years, food prices continue to soar. Onion – the most `electorally sensitive' vegetable is already selling at Rs. 30 a kg.
Charles Dickens in his epic novel A Tale of Two Cities wrote about a time, which was both like `a spring of hope' and the `winter of despair'. The contrast, which Indians in the two rungs live -- is actually recreating that Dickensian imagery. But such divides cannot be sustained. The Indian people living in our derelict villages and our appalling slums struck back against the authors of `Shining India'. There is no reason why they will not rise again. |
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