Financial doldrums

 As per John Christensen, an authority on secrecy jurisdictions, who has written the foreword of the book, India ranks fifth in the world, in terms of the scale of its illicit outflows, and between USD 22-27 billion of domestic capital flows illegally out of India every year. With the increase in corruption levels in the country in the last few years, scams hitting the headlines every day, and the government remaining a silent spectator, the book is very timely and educative for all.

 As the author has pointed out, corruption is the manifestation of poor governance and results in the flight of capital from an economy. Capital flight causes poverty, which in turn feeds on terror. Terror leads to chaos, crisis and calamity and in this situation, the corrupt, criminals and terrorists flourish.

As an accountant of great experience, the author has shared details of hawala, money laundering and tax havens. While there are no official estimates of the amount of illegal wealth parked in tax havens abroad, as per the most conservative estimate, USD500 billion is parked in tax havens. Information about 1000s of Swiss bank customers from about 180 nations is available, which is now in the possession of the French government. Spain, Italy and Germany have obtained their share of the data, but there is no mention about India showing any interest in this matter.

 The book has touched upon important aspects of market sentiments, the role of the media in the swings and its effect on the stock market. The investment by the financial sector into the commodities and futures market is affecting food prices, irrespective of the demand-supply relationship.

Today, as we witness an abnormal rise invegetable prices and the government’s helplessness to control the rise, the discussion in the book on this aspect is pertinent. The media plays a very important role in influencing the psyche of the people. As such, the role of the financial players in influencing the views of the media also needs to be looked at. The arrangement between the media and financial players through ‘treaties’, affects the media’s role as an independent commentator.

India allows Foreign Institutional Investors (FIIs) to invest in the stock markets, provided they register with the Security and Exchange Board of India (SEBI). The government allows Participatory Notes (PNs) as derivative instruments to be issued by FIIs to foreign investors — individuals or corporates who want exposure to Indian equities but do not want to register with SEBI.

Although PNs are contracts between a foreign institution and a foreigner to invest in India, the norms for PNs are lax, and details of investors are not strictly maintained. It therefore allows a large number of undesirable elements, including terrorists to invest in the Indian stock market. Although a number of committees constituted by the RBI has recommended the banning of PNs, they continue to dominate the Indian capital markets.

 The book divided into 10 chapters starts with the story of loot and scoot from India: the present state of affairs in the areas of growth and poverty, governance, agriculture, education, environment, infrastructure and industry, the state of corruption and the government’s role in promoting the loot; all these are in sharp contrast to the promises made by Pandit Jawaharlal Nehru in 1947. In the next chapter the book discusses the terms hawala and money laundering, and how these are used to loot the country and promote terrorism. Chapter three goes on to discuss the role of tax havens, provides statistics on Indian ministers’ foreign travel particularly to Italy and Switzerland, the incompetency of the IMF, etc. Chapter four discusses the global response to money laundering and tax havens after September 11, 2001, the day of the unfortunate events in the US. Chapter five discusses the role of watchdogs: the media, SEBI, ICAI and others and their surprising silence on the scams. The role of the joint parliamentary committee and the subsequent actions by SEBI on the stock market scam have been highlighted in chapter six. Chapter seven discusses the role of PNs in manipulating the stock markets.

The RBI’s role in the monetary policy management of the country, the Indian government’s response to the scams and the rot in the financial system of the country which makes us vulnerable to terror attacks, are discussed in the last three chapters.
The book Sense, Sensex and Sentiments discusses all the ways and means followed to acquire wealth by questionable means. By highlighting the wrong doings and drift patronised by the government, the author tries to wake us up. The author discusses all the loopholes allowed by the government to acquire ill-gotten wealth and the laxity of the guidelines.

The book should be read by all patriotic Indians as it educates us on the apathy of the government to prevent the loot of the country.

Sense, Sensex and Sentiments: The Failure of India’S Financial Sentinels
M R Venkatesh
K W Publishers
2011, pp 336
Rs 595