'Scams sullying India's image'
Today in New Delhi, India
Jan 22, 2019-Tuesday
New Delhi
  • Humidity
  • Wind

'Scams sullying India's image'

Scams are sullying positive image of India's human capital, says Dr Bhaskar Dasgupta.

india Updated: Dec 16, 2003 16:46 IST

The India Babble
Monday saw the Sensex closing 16 points down in fears of the FII's reaction in the future, as well as the forthcoming November futures contracts. Steel stocks went up after rumours of a price hike and the auto ancillary stocks also moved up on reports that the global auto industry will increase outsourcing from India. Tuesday saw good vibes from the Indo-Pak ceasefire, Arun Shourie's announcement of further privatisation issues, rise in the NASDAQ the day before, and the rupee's fall, which all lead to the Sensex leaping up 72 points.

Wednesday was the Id-ul-Fitr holiday. Thursday brought the mythical 5000 mark onboard, but slipped to close 94 points up at 4989. This upbeat mood continued on Friday where good buying pressures from FII's and price rise anticipation moved the markets up to close the week at 5044. Although too late to affect the markets, Saturday's news that the foreign exchange reserves moved up to more than $95 billion for the week before last, is going to potentially ignite more comments about trying to manage this bludgeoning balance. Although the rupee is pretty stable and even cheapened slightly this week, the level of reserves will mean some major drastic action soon.

Two stories about leaks of examination papers, both medical examinations and management examinations, were shocking. Wonderful news indeed!! We get incompetent doctors and get even more incompetent managers. Both health and wealth lost. This is something which is absolutely reprehensible. Our human capital, something which we go about touting around the world as being well educated, is actually being damaged by these instances of corruption. Just like people who make fake baby milk powder are considered to be the lowest of the low, these people who play with the education system are even lower than
pond life, because they are sapping the essential strength of the country. Shame!

The stamp paper forgery and corruption scandal are slowly increasing. This is absolutely foul and frankly, it sometimes makes one want to punish corruption crimes on this scale with life imprisonment and asset confiscation. These politicians, policemen and others who defrauded the country are not worth the uniforms they wear or the chairs they sit on. Bring back Kala Pani or get them breaking rocks or digging ditches. The sad thing is, almost every political party does this, with all the slogans of either secularity or Hindu nationalism. At end of the day, many of these politicians are basically criminals, thieves to the core. We have the lovely example of the defence minister, being responsible for the security of the country, accused of corruption. These people are hollowing out the country from inside while papering over the cracks with their ideologies. Double Shame!

A piece of good news came out when it was reported that the situation relating to FDI proposals will be revamped. Currently, most of the FDI proposals are first looked over by the beady eyes of the Foreign Investment Promotion Board. Now, many categories of proposals will be placed on the automatic approval route, such as proposals involving conversion of external commercial borrowings into equity, transfer of minority equity stakes in companies to relatives residing abroad, and several conditions relating to JV's. These automatic approvals will remove many a procedural hitch, and as we all know, the babu's can be very sticky indeed with foreign proposals.

The Iran-Pakistan-India gas pipeline has again come into the picture with news that Iran is willing to pay up to 60 per cent of the cost of the overland gas pipeline. The Iranian Deputy Foreign Affairs Minister MH Adeli said that India's concerns can be allayed by pay agreements, international insurance and inter-governmental assurances. Well, sirs, all those agreements and insurance will mean a hoot when it comes to the jehadi's and Bugti tribesmen. If the pipeline is breached, the downstream supplies and users will be massively affected and litigation and compensation will take its own sweet time to come. Finally, I have not seen any evidence that Pakistan can control its jehadi's. Sorry, guys, try another tack.

The World Babble
The Dow Jones Industrial Average closed Friday at 9,782, up 154 points over the week, while the NASDAQ closed up 67 points at 1,960. There was plenty of positive economic news during the week, such as growth (growth figures updated to 8.2 per cent woof woof!), consumer confidence, inventory and manufacturing. But the dollar is suffering badly against the major currencies and mainly against the Euro. The huge federal deficit is hurting the dollar badly and bills like the recent Medicare bill would not help it at all, on the contrary, this current expansion of deficit spending is a record. The dollar hit 1.2012 against the Euro on Friday and the Sterling is hitting a 5 year's high against the dollar at $1.7244 to the pound. Europe was mostly middling, but London closed about 20 points up over the week at 4342.

The news that China has decided to recapitalise the big 4 state owned banks has long been anticipated. These 4 banks have the potential to really roil the world's financial markets. The amount of non-performing loans tied up inside these 4 banks is shocking. After 50 odd years of bizarre communist directed state lending, which had as much relation to economic decision making as a cucumber has to a space shuttle, these 4 banks are a big mill stone around the Chinese economy. It will be interesting to see how they will react to the recapitalisation and whether the Chinese economy can bear the strain.

There is going to be a meeting of OPEC and non-OPEC oil producing countries aimed at stabilising the oil markets. As one has seen, the market has been swinging rather wildly due to geopolitical discussions, with prices frequently breaching the upper band of $22-28 band, which was agreed upon some time back. The problem is that the supply takes a bit of time to reach the forecourt, while the near constant bad news coming out of Iraq is worrying the market and making it nervous. This causes people to react disproportionately to news which would have otherwise only caused minor swings or been taken in stride.

The EU-US steel spat is nearing one of the critical milestones and in 2 weeks, the EU will start levying tariffs on politically sensitive US exports. In other words, if the USA does not remove the steel tariffs, then the EU will hurt the US President's re-election chances. Both are trade scoundrels, for all their pious prayers about free trade, both have some of the most evil protectionist regimes in the world and hypocrisy reigns supreme in the corridors of trade. Thanks to the Chinese for having a huge demand for steel, which is pushing up prices, it does look like the USA will remove the tariffs. This is yet another example why the developed countries look at the subsidies with a jaundiced eye.

The EU is not such a stickler for rules either. Germany and France will escape being seriously fined for violating the deficit rules, after being backed by Italy, UK and Spain. Guess what? The little countries such as Finland and Netherlands are furious at this stitching up by the big boys. I am afraid this situation is not going to get better once the constitution comes into play. The constitution will further tilt the balance of power towards the biggies. As expected, on Wednesday, there was a furious furore in Europe over this and word that the growth and stability pact will be watered down is causing massive ructions over the pact, the constitution and even potential credit ratings.

To top it all, the EU takeover code was agreed upon and it's a proper dog's breakfast, with the Germans getting very antsy about horrible foreigners taking over their nice little companies. It allows all kinds of poison pill and other anti-takeover defences and I tell you right now, EU productivity will remain lower than US for the foreseeable future, at least for 10 years. Stick that in your pipe and smoke it.

The third quarter US growth rate was updated to a massive 8.2 per cent annualised rate and this translates to 3.3 per cent over the past 4 quarters. Retails sales rose 8 per cent in the 3rd quarter as well, which just goes to show how powerful the government monetary and fiscal push was. This also meant that the corporate profits increased by almost 12 per cent over the
2nd quarter and strong profits are a good sign of continued recovery in the markets. Inventories are still being cut and $14 billion was cut in the last quarter, which gives an indication that the corporate sector will be rebuilding its inventory significantly over the coming months.

(Dr Bhaskar Dasgupta writes a weekly Monday round-up on markets and indicators. He holds a Doctorate in Finance and Artificial Intelligence from Manchester Business School and works in London in diverse capacities in the banking sector.)

First Published: Dec 02, 2003 20:31 IST