Is the only purpose of the government to boost share market?

The elections are over and the business media has gone berserk way beyond expectations. Tall claims are being made on how this election outcome is basically a victory of development. The media is rife with experts/wannabe experts with their laundry list of so-called reforms to develop Indian economy.

However, a quick glance at the laundry list shows how the list is just full of usual suspects revolving around macroeconomics and financial markets. Now one is not saying macro does not matter but is it just about this? and since when has development come to mean just stock markets? The experts citing India amidst a bull run for 15-29 years, Sensex kissing 30,000 by 2014 and some saying 1,00,000 in 10 years and so on. They clearly have missed how equity markets peaked just before the 2008 crisis worldwide and in Japan in 1989. And none of them really helped people as wealth got eroded in just quick time. So instead of asking people to be cautious and not put all eggs in the equity basket, more and more people are being nudged to move into equities.

Again, it is a very disappointing and dismal show from the experts. Do they think that NDA/BJP has come to power to just boost their prospects? There seems to be complete disconnect from what people have voted for and what the experts cite in their wish-list. Perhaps, sitting in ivory towers and scanning newswires have led to this really narrow-minded  thinking from people who are expected to be really broad thinking and well-read/informed.

I mean in a country where there is no form really what does reform mean? Across places in north India (where the new govt has won by thumping margins), things are really bad. Basic issues like water, electricity, roads, garbage, (I mean this issue has become as central as others) etc are such a problem. It is provision of these basic public goods and effective governance (as supposedly offered in Gujarat) for which such large section of population has voted. This effective governance has in turn led to trust amidst businesses which has boosted business prospects.Most people do have baisc water accounts and we fret over banking/mutual fund account!

This model which we are told has been implemented in Gujarat has to be tested in other states which will truly be a test. Mich of the agenda lies with State governments and centre’s interference will not be liked unless the govts at the state and centre are same. I mean the state governments ruled by BJP never really liked the idea of UPA at the Centre interfering in the past. So why should the UPA run state govts look kindly to the BJP govt at the centre? Infact, there are going to be serious and simmering issues which are going to be really difficult to tackle.

These experts have always chosen to ignore the challenges and glorify opportunities., End result is disappointment. Soon we will have performance reviews after 100 days and so on showing disappointments. Nations are not built overnight Sirs. It takes a long time. They are not like the equity markets whose fortunes change overnight. We need solid governance for many years to even get to basics. Much development has focused around regions which were already developed (and this is where most experts live) and in many even basics are not there or have become a concern due to growing population.

Such tall expectations do more harm than good. And focus on agenda which is so narrow is just so silly. Instead of just focusing on one’s own agenda, their should be far more connect to the issues which actually matter. We are way off before we just fix our issues like the Western world does on financial markets. And even there, we havee seen how damaging this whole thing has been.

Finally, one just doesn’t understand this obsession with independence of RBI. All people seem to be saying is that government should let RBI free to do what it wishes to do. Again, this narrow minded focus is leading to ignorance of larger institution  related issues. This whole western fixated approach of just looking narrowly at central banks is ay too overblown and not needed here. RBI is not the only institution which matters to the country. There are many others which need to be fixed and allowed basic autonomy to function. I mean in a country where the top-most institution of President is compromised, where is RBI’s position really? Then other institutions like Judiciary, Police, CBI, other financial regulators like SEBI, IRDA (which never really get any focus) need huge attention given the backlog of issues and lack of trust. Comparatively, RBI is much better placed and can be ignored for a while.

In all, we keep hearing the new government should not believe in business as usual approach. However, the advice given by same people is really about business as usual. The changes have to be brought to improve the lives of people and not just balance-sheets of select companies and individuals. UPA-2 did exactly as these experts said in their laundry list towards the second half of their tenure. But voters just ignored as much of these changes do not matter to people. One only wishes we could have similar voting for these experts too!

Someone said, the new got should usher in reforms a la 1991. Well, large number of people are still waiting to get their basics. Will the process start in 2014? We will have to wait and see…

2 Responses to “Is the only purpose of the government to boost share market?”

  1. econ neel Says:

    Dear Amol Sir,

    Refreshing to read this piece.

    Seriously this whole “oo la la -syndrome” has the shelf life of 100 days only.

    Though it is a welcome change from the previous jaded-Govt.

    I wish if not for the UPA-led states, atleast he can change the life for better of our brethrens in NDA ruled states.

    Expectation have been raised to some unsustainable levels. Enthusiasm on the road is palpable.

    I desperately hope it to be true……………

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