Is Indian democracy maturing? - Straight from the Hip by J Mulraj
Investing in India - Straight from the Hip by J Mulraj
Is Indian democracy maturing? A  A  A

11 APRIL 2009

From the consumer end, Indian democracy is maturing. People are demanding action not mere promises. They are voicing protests in unusual ways (witness the shoe being thrown at P Chidambaram as a protest against the granting of Congress tickets to Jagdish Tytler and Sajjan Kumar, perceived to be involved in the 1984 riots). They are putting up independent candidates who are, rightly, focusing on issues that matter to people, such as economic growth, provision of jobs, education, health and environment, instead of the divisive crap constantly mouthed by politicians who have lost touch with the people, including issues based on religion, caste and creed. So, from the consumer end, democracy is maturing.

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How is it from the supplier end, viz. from political leaders. The withdrawal of tickets to Tytler and Kumar indicates that they are responsive to public perception, unlike in the past, when, without the aid of communication devices such as TV, internet and telephony, public perception could be 'managed'. Yet almost all political parties give tickets to criminals including murderers and rapists, and the hope to reverse the trend of criminalisation of politics recedes with their increasing numbers. Politicians still largely concentrate their rhetoric on the divisive issues and damn the economic consequences to the nation. All of them make promises of free stuff, paid for by taxpayers not by their parties. One wishes for a public interest petition that seeks political parties to bear a part of the cost of such promises as a counterbalance to folly. Political parties also continue to misuse the institutions of democracy, such as the CBI, as admitted to by a former head of it.

One hopes in the coming elections the electorate decisively throws out all criminals and all those who mouth divisiveness of society, helping Indian democracy mature. One hopes, also, that institutions of democracy such as the judiciary, the law enforcement agencies and the army, are given independence and strengthened. Should that happen, the economy would start booming again as would the stock market. Should we end up with a fractured polity, the bear will re-emerge from its temporary hibernation. And no, investors, the increasing, new, demand for shoes is NOT a signal to buy shares of Bata.

A strong Government would be needed to handle social unrest as the global economic crisis deepens. It looks likely to, given that the asset bubbles of the past five years were larger than those built up in the 2000 dotcom boom. The outstanding liability in the CDS (credit default swap) market alone is some $ 56 trillion. Will a $ 1 trillion package by USA, followed by another $ 1trillion (most of it going to IMF for onlending to distressed countries, and not for buying toxic assets), be enough to restore confidence and get the world economies going again? It seems unlikely. The IT/ITES sector, which was an engine for job growth, is going to see job losses this year. All this would have social repercussions, needing a sensible Government.

For India we have a few things going for us. The KG oil and gas find will reduce our subsidy bills significantly, providing fiscal elbow room. Such elbow room would be needed, for political parties continue to spend other people's money in order to get elected. The fall in crude oil prices has already started showing; March 09 imports fell 32% to $ 16b., whilst exports fell 18%, to $ 12 b.

The Nano is another. Bookings opened for it last week, and there is a lot of demand. Production of a car at this price point is a technological and commercial achievement that must be applauded. Tata Motors got a $ 200m. loan from Standard Chartered, which would be used to partly refinance the $3b. loan taken for its purchase of JLR. In a bid to cut costs, JLR will set up production facilities in Indonesia.

The Tatas have already achieved cost cutting in its other major acquisition, viz. Corus where cost cuts of pounds 650m have been achieved already. Tatas, RIL and Infosys have made it to the list of most innovative companies in the world.

Back to the enfeeblement of institutions of democracy to serve political ends. CBI, which gave a clean chit to Tytler, which led to the shoe throwing incident and to the withdrawal of ticket, is also investigating the Satyam fraud. After 3 months investigation it has filed a (hold your breath) 65,000 page chargesheet alleging falsification of accounts! (Even if one speed reads 1000 pages a day, an impossibility, it would take 2 months to just read the charge sheet; is this necessary?) The CBI is still to decide whether there has been funds diversion! This seems ludicrous! Surely it would be a matter of days to obtain and analyse bank accounts! Is there any political angle to this CBI inability on funds diversion?

The sensex at the peak of the dotcom bubble, in Feb 2000, was at 6150. It fell 55% to a low of 2595 18 months later in Sep 01. The sensex at the peak of the current asset bubble, was 21200, in Jan 08. It has, since, fallen 59% to a low of 8619, in Feb 09. So in terms of extent, it has overtaken the dotcom bubble but in terms of duration, it suggests there is some time to go. Remember, the bubbles in asset prices are far larger than the dotcom ones. Besides a lot of funny money has been created through all types of derivative instruments. These would take time to work out of the system.

Last week the BSE-Sensex rose 455 points to end the week at 10803 and the NSE-Nifty rose 131 to end at 3347. We are at a resistance level, from which the market receded earlier and is likely to do so again. After which, it is possible that the rally may resume and probably break through the resistance at 10500. Should it rally beyond this resistance, as is possible, one should seek to exit. For no politician should expect these elections to be a shoe in!

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J Mulraj is a stock market columnist and observer of long standing. His weekly column on stock markets has run for over 27 years. An MBA from IIM Calcutta, he has been a member of the BSE. He is Conference Head - India, for Euromoney. A keen observer of events and trends, he writes in a lucid yet readable style and takes up issues on behalf of the individual investor. Nothing pleases him more than a reader who confesses having no interest in stock markets yet being a reader of his columns. His other interests include reading, both fiction and non-fiction, bridge, snooker and chess.

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1 Responses to "Is Indian democracy maturing?"
cj bhide
Apr 11, 2009
we all can only hope for things to improve!it seems only wishfull thinking is'nt likely to bring-about meaningful changes.some soul searchingaction from the so called educated salary earners only can usher in desired results! Like 
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