In the 25 anniversary celebrations of 1991, we are seeing quite a bit of activity. It has given a continuous fodder for this blog as well. There are all kinds of articles (this one is a good summary) with each of the key actors trying to assess how things happened and their roles in the same. Some like Dr MM Singh call it a team work whereas others like Montek point to how their document was the brainchild. This is truly the finest hour for the lost legacy of the then PM PV Narasimha Rao who has a mixed record with success in economics but not politics. This was interesting in itself as he had no understanding of economics and was always a politician. But then I guess things are being carried too far away pointing to all kinds of characteristics which were behind the reform. We tend to overdo all such things and not just accept that somehow certain things happen.
Anyways, there is plenty of learning happening.
So far the discussion has been around the Prime Ministers, Finance Ministers, Central bank people and Planning Commission members. Most of these interviews were but expected. Most of them have been superstars of financial media in their own way.
This one article looks at a silent player – SEBI – which changed the capital market game in a big way. This is one area where our progress has been huge but it is barely discussed. The person here is DR Mehta whose seven year tenure changed quite a few things at SEBI. Unlike others, he just calls it a job. He also adds there was never a conflict with any of the Finance Ministers:
“I’m not interested in capital markets anymore,” says Devendra Raj Mehta, former chairman of the Securities and Exchange Board of India (Sebi). He was Sebi chairman during seven eventful post-liberalisation years, 1995-2002, launching a record 44 reforms that not only changed the way investors bought stocks in India but also brought transparency in an opaque world of corporates, stock exchanges and regulators.
“It was just a job,” says Mehta in a matter-of-fact manner before warming up to talk about “those days” when the market regulator unleashed a slew of reforms that restrained buccaneering brokers and promoters, while easing the operations of the capital markets.
Mehta, says he never faced any interference from the four finance ministers — Manmohan Singh, Pranab Mukherjee, P Chidambaram and Yashwant Sinha — when serving as Sebi chairman. He knew that making incremental changes, before making a broad brush stroke, was the easier path to success. “The best way to go about is to proceed in a slow manner, test the waters, then move a bit faster, and then run,” he says. “The dematerialisation of stocks proved this. In three years we did it. In the US, it took 15 years,” Mehta says proudly.
Initially, only eight companies were ready to test demat. Sebi started with those eight. “I am not a believer in the big bang approach,” repeats Mehta. CB Bhave, then chief of National Securities Depository Ltd, and Mehta decided the committe will meet the following month to review matters. When they met again, 80 companies were ready to demat. And in the third month, 200 were ready. “Would you believe that in three years, all the companies were required to trade in the demat form?” Mehta asks.
Before demat came into being, the regulator and the stock exchanges were flooded with 26 lakh investor complaints, with the bulk of the complaints arising from signature mismatch. Demat solved the chronic problem in one swoop.
Demat of securities is taken for granted by us now. But it just changed the entire industry forever. Likewise, mutual fund investing, stock investing and trading , disclosures of information etc has leaped way ahead. We easily compete with the best western markets on many aspects of capital market functioning.
India is pretty much a capital market story now. Without the dynamic capital markets, India’s story is hardly as great. This has obviously created its own set of problems as well. To many critiques, India is seen as just a post of global finance. India’s one of the biggest successes since 1991 has also become its problem as well..