Saturday, December 10, 2005


The Indian stock market is the darling of liberalisation. The one place where the story of India is told in all its glory. This Post is however not just about stock market but an attempt to study as a model which many believe as the "India story". I am also attempting to see the path trodden by this institution of free trade (how free or how regulated is a different question altogather) over the years. The peaks, the valeyes and the mariana trenches. Before we plunge in lets rewind the clock a bit. For more about Sensex check out tradersedgeindia


One of the lowest points in the track of sensex was May 2004 when it touched a low of 2400. Today (10/12/2005) the same index is at 9067!!!. Along the way you would see falls after every peak and a bigger raise after every fall, thus taking the market higher. This is called Market Correction "Markets are always true", thunders Rakesh Jhunjhunwala (considered as India's very own Warren Buffet). On his walls hang the caricatures of Warren buffet, Franklin Templeton and many other investment gurus. Such is the faith in the market and celebrations in its raise. When the markets fall, its a different story altogather. The small investor sinks fast and deep. The surviors (large investors, FIs, Banks) profit from the fall too. They turn bears quickly (short selling) with chameleonic efficiency. I remind you, this is not a post on stocks.

The bulls keep telling the masses. "Buy when the market falls. Its just a correction. There is an opportunity". These market evangelists are the stuff legends are made off. The bottom of this food chain is always some small investor having a few lakhs of exposure. Mostly he comes out with his psyche deeply scarred by a butchers knife. He still carries on and says solemnly "The Market is never wrong. Its just a correction ". Mind you the market is never really free. It is corrupt, manipulated, engineered by a few (The infamous of the mehtas and Parekhs). Still these educated folks suspend their thinking and get duped again and again and again.

Funny isnt it ? The very same people who swear by the market turn a blind eye to government spending money on human infrastructure. The very same people who say, the every slump (even if it is a bllodbath) is a correction cannot accept a correction in government priorities, national reforms and common man's priorities. For them the only indicator of a Nation's health and welfare is the Stock market. The government need not sneeze and catch a cold whenever the stock markets fall. These are people speculating their wealth to gain more wealth. They should know better. The government should not by decree engineer a budget (India's budget is an annual finanial polcy anouncement of the govt.) to spike up the stock market.

Its time we reversed investment trends, shift gears and expand the wealth.Its time we invested in infrastructure (quiet apart from roads, airports). Its time we built more schools, Equiped them to educate, feed and empower more kids. Its time we ensured, water, housing for the poor. These should be classified as infrastructure and not as deficit.

The reformist brigade through the world bank and the anaemic intellectual community has created a ghost of which the Indian govt is scared. Almost shaky. Its called fiscal deficit and the abuse word in and around the finance ministry is fiscal debt. This ensures that all developement expense like free power to farmers, free education is classified as expenses and swanky IT parks (complete with golf courses and dancing fountains) in India's silicon valley benifiting a select few is considered investment. However ugly, obnoxious and repulsive all this may sound. Its the naked truth shorn of even its undergamrent.

All this needs to be changed. Enough of gingerly tip-toeing through indecision and maintaining status quo. Enough of keeping one eye on the markets and another eye on the chair of power (placating the left). Enough of striking a balance between greedy market players and socialists. Enough of branding any idea/person concerning larger good of India as communists. Being called a communist today is considered a slur in India. Sad how we became a nation of free thinking to one sucking up to the large dick of fat, obnoxious world bank executives.

We need a correction in our government spending. A large one. And this correction is the only way India can leapfrog from the current level of 8% GDP to 16% GDP covering a wider spectrum of people. We need to equip an entirely new section of people below the poverty line and show them the "quand" (borrowed it from jerry McGuire). We cant do this by killing the old below the poverty line by robbing their livelyhood and driving them to suicide deaths. We have to do this by making their own lively hood profitable for them. We need to give specific emphasis to rural economy and thrust liquidity back into dried up markets. We need to get back to an era of bank financing developement projects and re-nationalise these banks. I dont think you can change the course of money flow by sitting and twiddling your thmubs. We need to replicate the success of microcredit financing and make it a bank's mandate to fund it. We need to get our banks back in our control.

"Government", Jared Diamond says "is a kleptocratic institution". It takes from people. We need to make the government give back that money. But not to the same people from whom it took, but to those who dont have enough. Government should become the big daddy of all "Robin hoods". Only then can there be real equality and opportunity possible between a high flying jetsetting IT professional's kid and a simple farmer's kid.

Will the market pundits buy this logic ? I think they will. If the believe in a larger goal and are large hearted enough to make small sacrifices. Most people in today's urban india are decent people. But evangelised by a wrong god and sold onto his lies. They very willingly submit themselves and become foot soldiers of a few who make more money and share a small piece of that pie. This need not be the case. This can change. The history of India is strewn with such instances of people raising over their own self interests and working for the country.

I think most people will see reason. Afterall hasnt the sensex risen higher after evrey correction ? Even when the correction went on and on and on for months togather ? Havent the same market pundits accepted this truth ? Dont the say the market is never wrong even when it is manipulated and engineered ? Why then is it so difficult for them to accept a national correction on developement priorities ?

That is the only way India can raise higher. Let there be that correction.

The very fact I can say this without fear or fervor and the very fact that every person in India rich or poor can exercise his belief and effect a real change makes India much much better than china. To be a peasant in India is relatively much better than to be one in China.

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