INTERVIEWS
SPECIALS
CHAT
ARCHIVES

Business Commentary/ Jay Dubashi

Fearsome four months ahead

Who said India was a functioning anarchy? It is functioning all right, though there is no proper government in Delhi right now and the leading Opposition party is without its head. But the economy doesn't seem to be affected and Dalal Street is going as strong as ever.

There is now complete divorce between Delhi, the political capital, and Bombay, the country's commercial hub. The more critical the situation in Delhi, the stronger the stock markets.

Within a week of the collapse of the Vajpayee government, the Sensex was climbing again and touched 4000 points by mid-May, a rise of 25 per cent in less than three weeks.

On May 15, three Congress leaders, one of them a Maharashtra bigwig, dropped their bombshell against Sonia Gandhi. The Sensex did not flinch and kept climbing. The day Pawar and Company were expelled from the party, the Sensex breached 4,200 points for a while, before falling back to just over 4,100.

Dalal Street has found a way of brushing aside all adverse news, or, for that matter, all political developments as irrelevant.

But don't go by the stock markets. India is much more than the sum of its markets. There are millions of Indians who have nothing to do with markets, and are not affected by goings-on either in Dalal Street or Raisina Road. They carry on as usual, trying to make both ends meet as best they can.

But businessmen were a different tribe. For them politics in Delhi mattered more than price movements in Bombay or elsewhere. A political crisis -- and India has had more than one can remember in the last few years -- would get them to Delhi on the first available flight from Bombay or Calcutta or whatever. Now the flights run empty, so much so that Indian Airlines is offering discounts to fill the seats.

This is all in the short term. In the long term, however, the political chaos in Delhi is bound to have its impact on the economy, as it always does.

See what is happening in Russia. It seems to have a new prime minister every few months and has had half-a-dozen in the last three years. And the Russian economy is a big mess.

Those who believe that the Indian economy is going great guns, as government spokesmen insist, should try and look below the surface. Last year (1998-99) was terrible, no matter how you look at it.

All indicators point the wrong way. Industrial growth collapsed to less than four per cent, the lowest in six years, and just about half three years ago. Exports were actually less than last year and are still not looking up.

Only agriculture seems to have done well, but that is because of the good monsoons, and has nothing to do with how well or badly the government has managed the economy.

The industrial slump has affected everybody. If some companies have done well, it is because even in a slump, such companies manage to do well. But by and large, the industrial scenario is depressing.

Out of 5,000-odd companies listed on the Bombay Stock Exchange, only about five hundred, that is, ten per cent, have managed to keep their heads above water.

Most of the companies are showing profits, because of profits they have made on the sale of their assets. Companies are cutting out all flab and have gone on a diet. But there is a limit to how much fat you can cut, and when the knife reaches the bone, you are in trouble.

I forget about prices. The inflation index is as low as four per cent, which the government claims is a big achievement. Actually, prices are down because there are no buyers, and there is no investment.

Indians are not buying for the same reason the Japanese have not been buying for the last ten years. They are unsure about the future and would rather keep their cash savings in banks and fixed deposits than go out and splurge, at a time when their jobs are on the line.

It is depressing to think that we are going to have four more months like this, four more months of uncertainty and chaos, and of a lame-duck government that is just counting days. At the moment, the markets including Dalal Street, do not show it, but they will very soon.

Jay Dubashi

Business News