Reacting to the dizzy heights that the sensex has climbed during the last 10 days, the finance minister had a word of caution. He stated “I do not think retail investors are entering the market at this level.
I would advise them caution”. It is simply unbelievable. The sensex peaked 17 k from 16 k within six trading sessions. This has broken the earlier record of 19 days when the sensex zoomed from 11 k to 12 k in March 2006.
However, Chidambaram does not appear unduly perturbed. He greeted the breakneck speed — “there is apparently a lot of interest from foreign institutional investors. Why should we not welcome it”. And he is dead right. FII’s have pumped in Rs 14,639 crore ($3.7 billion) in just five days after the American Fed cut interest rates by 50 basic points.
Obviously, this is celebration time for the finance minister. Because this is precisely what globalisation is all about.
The principal role of capital now is not just deployment for production of goods and services; it is increasingly and disproportionately more towards investment for making speculative gains.
But who gains? Some of the top gainers are Reliance – companies belonging to both the Ambani siblings, Bharati, HDFC, L&T, Hindalco of the Birlas, Mahindra & Mahindra, Tatas, ITC and of course the IT majors – WIPRO, Infosys and Satyam. The incremental growth in the networth of these companies in just a few days the sensex moved from 16 k to 17 k has been between Rs 1500 crore to Rs 6000 crore.
Generally, this has been the trend for the economy over the last few years. That is why India has witnessed the arrival of its first trillionaire in the country. But it is not just stocks – there are other categories of assets which are also increasingly becoming instruments for speculative investment. The real estate and commodities, particularly foodgrains have also attracted lot of speculative funds.
But what is the effect of all these? According to the National Commission for Employees of the Unorganised Sector chaired by Arjun Sengupta, around 77 per cent of India’s population is earning less than Rs 20 a day.
Two most glaring areas will be sufficient to demonstrate the outrageously unacceptable situation of the lower rung of Indian society who are consigned to the “lower depths” of human degradation.
The condition of the peasantry in the country betrays the sense of desperation. Almost across the country the contagion is spreading. Yes the phenomenon of farmer suicides. The major brunt of the agrarian crisis is afflicting the growers of commercial crops like cotton, tobacco and spices or plantation crops like tea and coffee.
The upward spiral of input costs – the slump in the price that they fetch in the market and the burgeoning burden of debt, mostly outside the institutional system from blood thirsty moneylenders – all these are becoming symptoms of this first decade of the new century.
The finance minister, while he openly embraces the huge FII inflows, appears in contrast, tight fisted in bringing down the interest rate for our peasantry. And for these hapless farmers there is no other go but to approach moneylenders.
There is even talk among the policy making circles for legitimising and institutionalising the role of these moneylenders! The government is trying to liberalise the peoples’ savings in the form of provident fund and pension by deploying them in the stock market under private fund managers.
If this concern had been shown for creating some flow towards the people who snuff out their own lives, the country would have to worry less for the dwindling per capita foodgrain production.
The agrarian crisis and the consequent demand supply mismatch is creating the backdrop for yet another major problem that demonstrates the contrasting approach of the government. This is the area of food security.
With the per capita foodgrains coming down continuously, the government policies have led to a disproportionate reduction in its own stocks. And consequently the foodgrains available to the public distribution system is coming down sharply.
A major liberalisation of the procurement procedures allowing the full play of the private companies in this activity is denying the public distribution system of its essential supply line. So, there is a situation where the public distribution system gets into a mode of continued dismantling.
While this leads to a lowered level of food security, stocks and more importantly futures are available for trading across the counters in our commodity markets. The financial market players make a killing, while the Vidharbha farmers continue to commit suicides.
The brunt of the situation has also come to plague the urban poor and the middle classes. While inflation is down to 3.23 per cent – lowest in the last two years, food prices continue to soar. Onion – the most “electorally sensitive” vegetable is already selling at Rs 30 a kg.
Charles Dickens in his epic novel A Tale of Two Cities wrote about a time which was both like “a spring of hope” and the “winter of despair”. The contrast which Indians in the two rungs live – is actually recreating that Dickensian imagery. But such divides cannot be sustained.
The Indian people living in our derelict villages and our appalling slums struck back against the authors of Shining India. There is no reason why they will not rise again.
(The writer is a member of CPM’s Central Secretariat.)
