MARKET PERSPECTIVE

By J Mulraj

AUG 31-SEP 6, 2024

Good governance needed to chart the future course

In his classic, ‘A Tale of Two Cities’, Charles Dickens describes the divergent paths of Paris (in the period 1775-1792, before the French Revolution), and of London. He describes the conditions in Paris as ‘It was the best of times, it was the worst of times, It was the epoch of belief, it was the epoch of incredulity, It was the spring of hope, it was the winter of despair, We had everything before us, we had nothing before us’

India, too, epitomizes the spring of hope, in all its many achievements. It, too, has its weaknesses which, unless tackled with good governance, threaten to turn the spring of hope into a winter of despair. One doesn’t expect it to be so, and pray it does not, but we need to be mindful of the pitfalls.

Watch two experts, Manish Chokhani and Utpal Sheth, pointing out the reasons why, as Utpal points out, this bull run has gone on for 49 months !!! without a 5% correction, perhaps a global record of sorts.

Manish expands on this in his sober, insightful, manner. He points out the power of retail investors, who save 25% in a $4 trillion economy, or a whopping $ 1 trillion annually. Equity investment is an important component of his savings.

The retail investor in India has tasted the elixir of superior returns on equity, compared to the return on his erstwhile preferred fixed income investment. Having tasted blood of hugely better returns, he has taken to equity investing like a duck takes to water. Investing through a systematic investment plan (SIP), in which he commits to a monthly investment, regardless of trend, retail investors provide huge domestic funds. In June 2024 monthly inflow into SIP amounted to Rs 23,000 crores ($ 2.7 b every month). That helps explain the 49 month without a 5% dip record. Besides investment, the annual saving of a trillion dollars is used by individuals for consumption. Witness the unsaturated demand for two wheelers, cars and housing.

Manish, though, sounds a caution that euphoria can’t last forever. Despite the strong growth story, we should be prepared for bumps.

Watch the video of Dr Anand Ranganthan, a well known  thinker, columnist and scientist. He, too, points out the huge achievements made by India. For example, the average life expectancy has risen from a mere 32 years after independence in 1947, to 72 years today, India’s poverty rate of 72% in 1947 (after the economy was plundered by British rule) to 4.5%, today, infant mortality rate has fallen from 160 (160/1000 babies die early) to 24.

So, India has made some great achievements of which we should all be proud. Yet there are several things to do. As Robert Frost wrote in his poem, ‘ I have promises to keep, and miles to go before I sleep’. The tremendous achievements are scarred, e.g, by the facts that, as Dr Ranganathan points out, a whopping 300 m Indians still earn Rs 60/day, or less than a dollar, 150 million children are still out of school, as many as 45% of children under 5 years are chronically malnourished, a fifth fall children have never been vaccinated, etc. India’s GDP at $ 3.9 trillion, makes it #5 largest economy in the world. This is due to its huge population of 1.4 billion, the world’s largest. On a per capita basis, India’s GDP ranks it 136th (out of 195 countries) in the world, incidentally, below Sri Lanka.

India’s GST (goods and service tax) collections are over SD 21 b. a month! The woefully depressing social indicators indicate that the money is not being sensibly spent. Corruption is rampant, especially amongst the polity, as raids on them reveal mountains of unaccounted cash but never result in any penalty. It’s an Orwellian Animal Farm, where some animals are more equal than others.

Citizens ought to be assured personal safety. Yet, a dastardly rape of a female medical intern in Kolkata reveals, it is not. The State Government, headed by a female, is woefully inadequate in its response, as is the Centre, in not imposing President’s rule, justly deserved.

Nor are citizens assured safety against financial fraud. A fraud was committed 11 years ago by a wholly owned subsidiary, NSEL, of a company promoted by Jignesh Shah, called Financial Technologies Ltd, a listed company. It has been renamed 63 Moons Technologies.

The Government is culpable in the fraud for these reasons. It gave NSEL a license to operate a public Exchange platform. It did not appoint a regulator for the spot Exchange, as it should have. Hence the Exchange went unregulated. The commodities traded on the Exchange were to be stored, as a collateral, in warehouses, to be overseen by the Warehouse Development and Regulatory Authority (WDRA), the regulator. WDRA did nothing. The investigative agencies of the Government did nothing.

Now comes the shocker! The Competent Authority, appointed by the Government of Maharashtra, has just stated, in a written affidavit, that Jignesh Shah had siphoned off moneys from assets frozen by a court, breaching Supreme Court orders! Read https://indialegallive.com/top-news-of-the-day/news/jignesh-shah-63-moons-siphoned-off-court-attached-properties-rs-5600-crore-nsel-scam/

So, Mr Modi, are you protecting your citizens? How can your various agencies drag their feet for 11 years only to be told that funds have been siphoned from assets supposedly frozen by courts. Mr. Chief Justice – are you going to investigate?

So, which India do we want? The snake charmer, in the illustration, above? Or a progressive, technologically advanced India demonstrating its prowess in space travel, amongst other things?

And, unless we start to seriously (not mere lip service of Nirmala Sitharaman allocating a few crores for child vaccination, a few more for more nutrition) the societal problems, including a pathetically slow judicial system, can we truly become a ‘developed’ country? Think about it.

Last week the BSE Sensex ended at 81183 for a weekly loss of 782 points.

Investors would be looking to see how much US Fed Chair J. Powell will lower its interest rate by, at the next meeting, on Sep 17/18.  Now that inflation appears tamed, and now that the job situation seems murkier after a revelation by the Labor department that it overstated  cut of 25 basis points is expected; a larger one will be a surprise.

The fact is that inflation is mainly caused by bad policy, symptomatic of poor governance. Consider how the Democrats, who controlled the US purse strings through Congress, which they then controlled, denied funding $5 billion to President Trump to finish building the wall to stop illegal immigrants. A Democratic President, Biden, was then elected, had an open border policy, and spent $150 b. on the 20 m. illegal immigrants who came in (read https://www.zerohedge.com/political/us-taxpayers-paid-150-billion-1-year-migrants). Any wonder that inflation then results?

If the potential of India is to be achieved, and just in GDP numbers but in truly becoming a just, educated, healthy, law abiding society, public governance has to improve. The ‘chalta hai’ attitude must be discarded along with the sort of political compromises that permits politicians to get away with all sorts of crimes. Only then will it be ‘A Tale of One India’.

Picture Source: Bing

Comments may be sent to jmulraj@asiaconverge.com