Tame the bull, rein in the red

There are those within the Left, and its ideological fellow travellers, who would go so far as to see Friday’s crash as some kind of an evidence of the markets’ arrogance. That we do not like to see you guys in power so here we go with our money. This is erroneous, even if the market behaviour was neurotic. Similarly, there will be many in the financial community who will read too much in this flurry of almost contemptuous statements by so many Left leaders today, particularly the normally soft-spoken A.B. Bardhan’s promise to send disinvestment “bhaad mein” (into hell, or, literally, into the furnace). The last thing you now need is marketphobia, on the one hand, met in equal measure by Commiephobia, on the other. This is the globalising India of 2004, with a solid constitution, consistent economic policies, and its most mainstream, middle-of-the road party in the lead in the ruling coalition. Nobody can run away with the agenda now. And nobody should see the need to run away with his — or his clients’ — money either.

Before we lecture the Left, let’s give the markets a reality check. What exactly has happened over the past seven days to cause such panic? Yes, the government has changed in an election, but you would expect that in a democracy. The same fund managers, until a couple of weeks back, when opinion polls were still showing the NDA safely ahead, were lecturing the big investors around the world on how the maturity of India’s democracy gave it so much stability of the kind that would be the envy of other emerging markets. Why, then, such a fear of change? Apart from slowing down — or even stopping — disinvestment, what else can this government do to suck the oxygen out of the markets?

Strategic disinvestment was a contentious issue even in the NDA. Arun Shourie’s biggest achievement was to have managed to sell a few in spite of the sabotage and sniping from within by the BJP’s ideological stormtroopers and in situ corporate lobbyists. Even if the NDA came back to power, strategic disinvestment would have been extremely difficult. To begin with, the matter was already in the Supreme Court and there was no knowing how long it might take and in which direction the verdict might have gone. Second, the opposition from within, rooted primarily in old-fashioned corporate lobbying but wrapped in a tattered ideological veneer, was not going to go away. So how disastrous is it now that both the Left and the Congress are swearing that HPCL and BPCL will not be privatised? If any fund manager was holding these scrips on the hope of a quick strategic sale if the NDA returned to power, he should get his head — and his MBA degree, presumably obtained in the pre-Joshi, high-fee regime — re-examined.

The market gurus tell you all the time to look at fundamentals and ignore the sentiment. So how have the fundamentals changed? Yes, disinvestment is in the cold storage for now, so, you’d suspect, is banking reform. But there is no evidence as yet to indicate any other rollbacks on tariffs and taxes, FDI or deregulation. The manifestos are all there to read and much as I’d be disappointed with them for having taken so long to come up with words of comfort, you really cannot wish away the Congress, which initiated the reform, and Dr Manmohan Singh, Pranab Mukherjee and P. Chidambaram, who shepherded these measures through difficult times.

But what are the markets all about, if not sentiment, euphoria and gloom and not a little bit of game-playing? The problem is, the leaders of the Left understand that as little as the most-vaunted fund manager knows of A.B. Bardhan’s curriculum vitae. If you had done his research on Google after that “bhaad mein jaaye” outburst by somebody so gentlemanly in real life, he would have found a 1996 interview to Outlook, where the same comrade says, quite candidly, that he disagrees with the then United Front government’s Common Minimum Programme. You can accuse Comrade Bardhan of not understanding the markets, but you can’t call him a hypocrite, or presume that just because he says so, his views will be binding on the coalition. Again, for others who won’t figure this out so quickly, when Bardhan made that earlier statement, his party — the CPI — was in the coalition and his colleague, Indrajit Gupta, was the home minister. By the way, before the markets open on Monday, get yourself a copy of the former UF government’s CMP which talks of $10 billion in FDI per year.

For decades, the comrades have seen wealth creation as an immoral activity and money as the great satan. They talk glowingly of their reforms in West Bengal. But they forget two things. One, that these are being carried out, almost singlehanded, by Budhadeb Bhattacharya through the sheer force of his own personality and conviction. Second, these look so good only when compared with how completely closed and anti-entrepreneur the state had been for a long, long time. Compared to where the world, even many of the progressive Indian states, have reached meanwhile this is still early days.

Therefore, don’t expect these comrades to figure out how a mere statement made in anger, irritation — and to be fair, in passing by a Bardhan harassed by very persistent hacks — can not merely shave one lakh crore from your own nation’s market cap, it can also colour the market’s perception of your politics and sense of responsibility for a very long time. In 2004, no government that the markets see as hostile can survive. The rhetoric of Kolkata’s BBD Bagh has to be tempered to provide for the sensitivities of Dalal Street.

It is, however, difficult to explain all this to people who have looked at wealth and money with suspicion, who confuse college-canteen rhetoric with pro-poor politics or trade union style sloganeering with policy. It is therefore the responsibility of the Congress not only to disabuse them of these notions but to also keep them in control, even if it takes too long to win them over to the cause of reform or globalisation. One thing you would say for the NDA is that while it had its Togadias and Swadeshis snapping at its heels, or generally hunting for headlines, it kept them in check, or at least mostly insulated them from its policy-making. As the dominant leader of this coalition, it is for the Congress now, as it recovers from the shock and awe of its unexpected victory, to restore sanity — among its leftist partners as well as the equally sentimental bourses.

Write to sg@expressindia.com