The bottom line is that the stock markets are totally out of sync with the performance of the economy and its poor health. Clear signals are emerging that something is rotting inside there and this is a recipe for disaster, which our nation can ill afford during these abnormal times, writes former IAS officer V.S.Pandey
In every nation , in every era , rulers bungle only when they develop a disconnect between what the people actually want or aspire to and what the rulers perceive to be in the best interest of the public. This very disconnect has led to the fall of many big empires and dynasties. This trend continues even today when technological advancements have made gauging the people’s mood very easy. How can, even in today’s current information infested world, not only kings and rulers but also democratically elected governments fail to notice the mood and aspirations of large section of masses, begs answers.
Rulers, particularly democratically elected ones, need to govern sensitively and prudently so that not only the interest of the influential and well off sections is taken care of but aspirations of the mass of population are fulfilled, at all costs. This aspect can be ignored only at one’s peril with consequent loss of power in a democracy. But despite these ground realities, successive governments in India have endeavoured regularly to buck the trend. People of India, like any other developed country, aspired to have proper education, health care and civic systems and institutions which could protect their lives, liberties, properties, contract systems etc. But unfortunately, the rulers were busy offering only slogans, jumlas like “garibi hatao”, “shining india”, “ social justice for all”, “achhe din aane wale hain”, “ sabka saath, sabka vikas ,sabka vishwas”, “free electricity”, etc. Even after seven decades of independence, we as a nation are still struggling to provide basic necessities to more than half of our population. This shows the total disconnect between the problems our people are facing and the thought process of our rulers, who are being chosen by the self-same people through honest , free and fair elections.
Currently the same disconnect is visible in our money markets. While the stock market index, the Sensex, has crossed the 53000 mark for the first time in its history, an all time high, Nifty is also hitting the roof, while our plummeting economy has attained an unprecedented low. The performance of our country, on the economic front, has been dismal for the past three to four years. Certainly the situation which has arisen due to the corona pandemic and subsequent problems are largely responsible for the contraction of our GDP, but why have we performed worse than most emerging economies? Despite, on the one hand the GDP growth figures being in negative for the first time in many decades, the stock markets are booming, soaring above all former limits. It is ironical that when the country’s economy is in complete meltdown , every sector has shown contraction, compared to the 2017-18 financial year , the share prices are sky rocketing!. When people have lost their jobs in millions, pay packets have shrunk, even the government employees have lost thousands of crores of incremental benefits ; tourism ,entertainment and hotel industry are gasping for survival ,the booming share prices are conveying the opposite- that things are rosy in our country. It seems this behavior of money market indicators has created a kind of comfort zone for the policy makers and a section of the media, which is busy extolling the billions of profits garnered by the big corporates. The misery of the public continues unabated. In addition to facing the cruel economic downturn , they have suffered the virulent onslaught of the corona pandemic ,especially during the months of April and May.
The reports published by RBI graphically descibes the Foreign Direct Investment flows that have come to India, during the past twenty years. It reveals that during the past two decades , more than half of the FDI in our country has come from the Mauritius and Singapore route only. Recently an enquiry has also been launched by enforcement authorities against a big corporate, for receiving a large chunk of investment through the dubious Mauritius route.
The abnormal bullish behavior of stock markets needs to be watched carefully. All the institutions like SEBI etc which have been set up to regulate the money markets have to be doubly vigilant, especially during these pandemic times. The news of massive flow of money to equity markets ,through the Mauritius route, should alarm not only our regulatory systems but also the government of India which is duty bound to ensure that the interests of small investors are protected and scamsters are not allowed a have a free run in the money markets.
The bottom line is that the stock markets are totally out of sync with the performance of the economy and its poor health. Clear signals are emerging that something is rotting inside there and this is a recipe for disaster , which our nation can ill afford during these abnormal times. The government of India must act decisively to prevent this brewing crisis.
(Vijay Shankar Pandey is former Secretary Government of India)