Thought for the day
“Landlords, like all other men, love to reap where they
never sowed.”
-
Karl Marx (German, 1818-1883)
Word for the day
Bestiary (n)
A collection of moralized fables about actual or mythical
animals.
(Source: Dictionary.com)
Teaser for the day
“Disruptive electioneering” – © 2013 Aam Aadmi Party, India
The big bang theory
The NDA regime led
by Atal Bihari Vajpayee (1998-2004) is remembered, in market parlance, for its
big and bold decisions. The tenure started with the big blast (May 1998 nuclear
test) and was punctuated by major initiatives like NELP (hydrocarbon
exploration), SEZ (key reforms in land, labor and tax laws in select zones),
NHDP (highways), PMGSY (rural roads), AAY (food security for poor), SGRY
(employment for rural poor), SSA (primary education for all), airports
privatization, port privatization, Electricity Act 2003, spread of mobile
telephoney, 100% FDI in core sectors, etc.
These initiatives
excited the global investors at a time when Indian IT professionals were making
big impression on global technology canvass. A supportive regime, Y2K problem,
easy credit post LTCM and Asian crisis (rates lowest since 1970s) and depressed
commodity prices (inflation lowest in decades) helped big investment
initiatives.
The problem was that
many of these programs were initiated hurriedly without putting an adequate
institutional mechanism in place, thus leaving the scope for misuse (of
discretionary powers by minister and bureaucrats), litigation (ownership of
natural resources), misappropriation (of natural resources by scrupulous
allottees), non-compliance (environment and sustainability norms) and wide
viability gaps (in absence of immediate demand) and thus planting the seeds of
financial stress, economic slowdown, mistrust and corruption we are witnessing
today. Subsequent UPA government have watered and nourished these seeds well.
Now, having learned
from the mistakes of omission and commission made and follies committed during
past two decades, Indian businessmen and investors are hoping (or should I say
assuming!) that new leadership will carry further the “big bang” initiatives
minus the follies, and thus reinvigorate the Indian economy.
I am fully with them
in their hopes and assumptions.
However, the only
caveat is that the new leadership will not be able to plant the seeds of
prosperity unless the field is cleared of the poisonous crop of mistrust,
misdeeds, and misallocations that has taken deep roots. Like Chankaya the new
regime will have to first uproot these plants and appropriately inoculate the
soil.
This is not going to
be easy. It will cause tremendous pain to investors and entrepreneurs, and
disruption of business activity and financial stress.
We have seen some
glimpses of this cancelling of telecom licenses by the Supreme Court, deallocation
coal blocks by the government, de-notifiaction of a number of SEZs, withdrawal
of investment proposals by road developers and steel companies and rising
financial stress in the economy.
We shall see more of
these. IDBI, ICICI, IFCI, UTI all are witness to what happened when last time
these correction were carried out.
That is not exactly
good news for someone looking for immediate gains in stock market.
More on what
Narendra Modi might mean for Indian economy tomorrow.
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