Let's not mess with 'Existing India'

This government is wasting too much time trying to 'control' things

Yes, you do have the mandate... you really do. Now, can you please settle down and work? The Reserve Bank of India needs a neutral governor, Indian stock markets need the foreign institutional investors(FII)  and all of us (the salaried) need job opportunities. Can you please concentrate on delivery rather than trying to create controversies everywhere?

The CEO of a financial conglomerate recently explained the BJP-led government’s behaviour with: “It is not unfair to want control, especially by a new regime. Many company heads initially take complete control to ensure that their vision is being implemented. Then, they let go.” He was quick to add, “But even after a year, I am yet to see a clear vision.” It perhaps explains the present government’s problem. Since there isn’t a clear vision, it is seeking control. The world, alas, works better on something called consensus. 

For example, the RBI governor, if unsure about the economy’s prospects, will not cut interest rates. It is the government’s job to keep trying, pretty much like P Chidambaram did when Y V Reddy was the governor. As a senior journalist, who knew both the central banker and the finance minister well, says: “Despite Chidambaram’s anguish that Reddy refused to cut rates, he did not try to influence him or take over RBI”  

On the other hand, Raghuram Rajan seems to be under subtle but steady attack. The Union Budget papers proposed to curtail the central bank’s role substantially. Now, FSLRC recommends the RBI Governor should not have a veto power over the commission which will be loaded with government nominees. While both the finance minister and Jayant Sinha (the latter seems to be the trouble shooter in a government which loves trouble) have tried to downplay the issues, do they really want us to believe that they are completely unaware of the recommendations, both in the Budget and FSLRC? One would have to believe that the government’s strategy seems to be to keep the central bank unsettled – not a smart move. 

Similarly, the stock market also has been hurling from crisis to crisis. Even before the MAT (Minimum Alternate Tax) issue has been resolved, the Supreme Court-appointed SIT’s proposal to tighten norms on Participatory Notes (popularly known as P-Notes) has started fraying nerves. In 2007, when market regulator, the Securities and Exchange Board of India, under M Damodaran proposed curbs on P-Notes, the markets crashed and the finance ministry had to step in to clarify. 

Whether we like it or not, foreign institutional investors (FIIs) control a large part of the stock market, especially the index stocks. For example, FIIs have 78 per cent holding in HDFC, India’s top housing finance company, 40 per cent in ICICI Bank and so on. If the P-Note uncertainty festers for too long, our stock market problems will only deepen.

    

Events like Make-in-India and Digital India may hold promise. But let’s not mess up ‘Existing India’.