Thought for the day
"Those who are believed to be most abject and humble
are usually most ambitious and envious."
-
Spinoza (Dutch 1632-1677)
Word for the day
Belie (v)
To show to be false; contradict.
(Source: Dictionary.com)
Teaser for the day
ICC World Cup gives much needed breathing space to AAP and
AK.
Media at least is not bothered about what they do, and for
that matter do not do, in next six weeks.
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 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.
PSB results of past two quarters are indicative of this. We
shall see more of these. IDBI, ICICI, IFCI, UTI all stand 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 this tomorrow
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