India escaped a full-on meltdown because of “less liberalisation” in the financial sector, the Left has said, but it warned that several risky financial measures being taken could expose India to a US-like crisis.
Left economists have asked the government to cover the country’s financial flanks and said their timely warnings are being ignored. The CPM wants greater government participation in banks and tighter surveillance on derivatives.
“The UPA government should immediately scrap all policy measures seeking to further liberalise India’s financial sector in the name of reforms,” CPM leader Sitaram Yechury told HT.
He said the government must realise that without banning of speculative forward/futures trading in essential commodities, rocketing prices cannot be contained.
CPM economist Prosenjit Bose feels the establishment seems to have drawn the worst lessons from the US. He said SEBI’s decision to relax restrictions on the issuance of participatory notes (PN) by FIIs was a risky move. The SEBI, while refusing to prohibit PNs, had applied a 40 per cent cap on total assets held by FIIs under PNs in October 2007. As the market witnessed a crash due to the pull out of funds by FIIs, the SEBI has suddenly removed all restrictions to woo the FIIs back.