They are succeeding mightly in dragging India back to where it was, oh say, about 55 years ago so that they can repeat the good old days of dismal 2 to 3% “Nehru Growth rate”. The market went down the tubes and the proverbial stuff hit the big rotating blades as soon as the commies opened their mouths. One feels sorry for the impoverished hundreds of millions who would suffer down the road due to this, of course. But that sorrow is partly mitigated by the realization that to a very large extent, these include those who voted the commies into the driver’s seat. Karma is a bitter pill to swallow, eh? Anyway, for the record, I include two snippets.
From the Acorn:
It did not happen when India went overtly nuclear in 1999. It did not happen when India massed forces on the border with Pakistan in response to terrorist attacks in Srinagar and New Delhi. It happened when the loony left exposed its ignorance of modern economics in the form of a monumentally stupid statement which seemed to confirm the markets worst fears. This was the deepest stock market plunge in 129 years! Line up Ketan Parekh, Harshad Mehta and all assorted scamsters of the 199os and all together they still cannot hold a candle to Comrade Bardhan’s achievement.
Yesterday, Shekhar Gupta asked international investors to come to appreciate the fine nuances of the geriatric gentry. Unfortunately, markets are global and they operate round-the-clock. India is just one of several economies competing for investment. If India is not able to signal that its house is in order, the ‘electronic herd’ will move its funds to competing economies in seconds. It is our geriatric gentry which has to wake up to the 21st century; else the 21st century will leave India behind.
From the Indian Express,
Attributing the crash to the spread of uncertainty and lack of confidence, [Jaswant] Singh said: ‘‘If a responsible leader who aspires to join the government makes statement, it will have an effect on market sentiments.’’ On whether FIIs deliberately manipulated the market, Singh said ‘‘I would be extremely cautious in commenting on this issue. We have a healthy market and our economic fundamentals continue to remain strong.’’
Great going, Mr Communists! Aside to Pakistan: Don’t you regret having invested in nukes for destroying India? Who needs nukes if the other side has communists?
Atanu Dey : Life is a Random Draw 
I am not knowledgeable enough about the intricate workings of the Indian stock market. All I know is that a substantial portion of market capitalization is due to foreign investment.
Now, is this foreign capital banking on India’s future economic growth or after short-term spoils in the public sector companies? If the answer is the former, they should not be spooked by a few comments from the leftists. In the end, the leftists cannot control majority economic policy. They will only pose problems in disinvestment and privatization, which brings me to the second question, what were these investors expecting in terms of these companies? Which brings me to 2 more questions, (1) how sensitive is economic growth on this decision of privatizing a few large public sector companies, some of whom may be profit making (??) today?, and (2) What are the valuations of these companies with respect to their profits, or assets, and their goodwill in terms of their market reach and internal security sensitivity?
There is one thing you condone that bothers me a little, about the electronic herd. If the mandate of the poulation is left-inclined, and the herd does not like it, what can the left do? They cannot just make an about-face after the fact. Forgive the cliche, but are we saying that democratic choices should be secondary to outside investment?
The herd has experience with the leftists in WB recently. There has been significant progress in the state recently compared to the past, irresepective of the fact that they have a long way to go. The herd you speak of should know this. In fact, even assuming jitters, calm reasoning should make this a buying opportunity.
All this makes me very suspicious. You quote that the herd doesn’t have time. They do, they are not stupid, and India is big enough on their radar screens that they take it very seriously. CnnFN and CNBCW have continuing coverage on India the last few days. It seems like the herd is just signalling, threatening and making its point. Brazil had the same experience when Lula came to power. He had to capitulate on his stance, and the markets went back up.
Or could it be, the herd is more afraid of Sonia Gandhi’s prime ministership and the following protests and agitations that will make the new government barely function? Now that Sonia is demurring taking the PM post, things will be interesting.
We have a large economy (in people now, which translates into $ later) that has been growing. Do we really think the left is going to take us back into isolation? I for one don’t think so.
I am just concerned that we are not taking the proper perspective and over-reacting. But, how India handles this is going to be more important than people across the world realise? What will the world’s largest democracy do? Does size matter? I think it does, but one has to know it before one can use it.
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Kirthi,
Television coverage of the Indian elections is insufficient to teach the deep nuances of Indian politics to international investors. Moreover, what the loony Left said was unambiguous – to hell with disinvestment.
Most people saw this as just the tip of the iceberg, a sign of things to come. It reflects more a failure of the Congress-led alliance to manage the ‘messaging’ that led to the stock market wipeout.
I’m sure there was some intelligent speculation and manipulation. But that’s the nature of markets. A responsible government or political party will not give an opportunity for such speculation.
Foreign investors could well have been in the game based on long-term prospects; but those prospects looked suddenly bleak after the BJP lost. Remember, the BJP had made reform and economic development the election issue. The loss of the BJP sent a signal that the electorate was not sold on reform. And the loony Left tipped a nervous market over.
The facts remain that 50 billion dollars was wiped out after the geriatric gentry spoke out. In terms of scale that’s half of India’s foreign reserves that it took almost an entire decade to accumulate.
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Nitin:
Some minor clarifications. I am not questioning the fact that the signal sent by the left may have been interpreted so by the market. Nor am I saying the market should not have done as it did. My point is regarding how we should react as citizens.
First of all, stock market dips (though not healthy) do not represent actual wealth lost. It is paper money. Just like we did not “lose” 50 billion on Monday, we did not “make” 25 billion yesterday on the rebound from an economic standpoint. In the short term, the stock market is a zero-sum game. Further, the entire market did not change hands. A few trades at low prices very quickly reduces “capitalization”.
Secondly, I did not mean to say that investors depend on CNN and CNBC on education on the Indian market. They are very intelligent and well-informed institutional investors for whom CNN and CNBC are just informational sources. Just the fact that they are focusing on the Indian market means that there is widespread interest about it in the investment community. After all, these channels cater to their audiences’ interests. That is all.
However, the questions that I raised are still there, and may be someone can answer them. The market did bounce back sharply on Sonia’s withdrawal. We are not sure if it was foreing investors who panicked. The information is not there, at least publicly. The left did not say anything new, so how come the sudden change in sentiment? Don’t tell me its Manmohan Singh being PM, because he was going to be the Finance Minister anyway, and Sonia would have had to listen to his advise as seriously as Narasimha Rao did 10 years ago. Him being PM versus FM, does it make that much of a difference? Aside from the market’s short term up-and-down, it is still far from clear what the long term ramifications (good or bad) are on public sector divestment/privatization on the Indian economy as a whole. The fact that a lot of people on both sides get very defensive and prickly when the subject is brought up means there is more to it than meets the eye. It is not just divestment, but what is done with the proceeds that begs the more important question. If the proceeds are used to plug repeating portions of the fiscal deficit, that is an asset-liability mismatch. If the proceeds are used to invest in long term infrastructure that will spur growth for the majority of the population, rural and urban, then it means something. Sadly, this dialogue doesn’t seem to be happening, at least in the public sphere.
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