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Chidambaram's disastrous year

There is no end to scams and scandals in India, as probably everywhere else. Five years ago, it was Harshad Mehta and his goons. This year it is a man called Chain Roop Bhansali, who was arrested on Sunday after he fled to Hong Kong with a much bigger loot than Harshad.

Bhansali has been operating within the same system as Harshad Mehta and Co. It is a system supposed to be ''regulated'' by Reserve Bank of India and Securities and Exchange Board of India, both of which have proved to be toothless tigers. In fact, but for public pressure, they would have, as they nearly succeeded in doing, washed their hands of the whole affair.

Nobody has tried to answer the question as to how these things happen again and again. Apparently, if you are a finance company, you don't have to register with any agency. You just open up shop, put advertisements in newspapers and collect the loot. One fine morning, when everybody is looking the other way, or is made to look the other way, you vanish, as Bhansali did with Rs 4 billion of public money.

This is taking liberalisation literally. Liberalisation does not mean you do what you please, and to hell with the rules. It means strict regulations and, of course, strict regulators. But when even bodies like the RBI are bending over backwards to please businessmen and financiers, regulation loses its bite unlike in other countries with liberal economies.

In fact, there is some kind of a race in India to avoid rubbing businessmen the wrong way. The print media is the main culprit. Only a few months ago, Bhansali's firms received kudos in business and other magazines for their dynamism. Bhansali, like Harshad Mehta before him, was hailed as a hero and became the subject of umpteen stories in these magazines.

Even the RBI, which ought to have known better, gave Bhansali a licence in principle, whatever that means, to open a bank. How he jumped the queue and got the licence nobody knows, while there was a long queue of other business houses, including such names as Tatas and Reliance, in the waiting list. It is the same RBI which now says that it is impossible for it to keep an eye on all finance companies, since there are so many of them, as many as 45,000, according to one count.

The Reserve Bank is now blaming SEBI and the latter is blaming the central bank. This is passing the buck, the usual bureaucratic game. One does not know whether the bureaucrats in the finance ministry are parties to this game. They too had no clue to Bhansali's activities, though they should have had.

What happens now? The scam is in the hands of the CBI, but its hands are so full, it can hardly do justice to it. Bhansali's properties have been attached and his firms -- there are two hundred of them -- closed down. There is still some money in the kitty, and some of it will probably be handed over to those poor investors who have lost their shirts.

It is doubtful if the government has learnt any lesson from these scams that will simply not go away. It is all very well to open up the economy. But the more open an economy, the closer should be the eye which is riveted on it. There are Harshad Mehtas and Bhansalis on the prowl all the time, and they have to be kept under observation too. It is wrong to think that an open economy can function without controls. It may do so, but there will always be somebody to take advantage and run away with the loot.

It has been a disastrous year for Finance Minister Chidambaram despite all his dream Budgets. It seems that the government has lost control over the economy and simply does not know what is happening.

The RBI has no idea what the finance companies, which, between them account for almost Rs 1,000 billion of public funds, are up to. It does not even have their address. The SEBI has no clue to what is happening in the stock market. The market should have boomed after the dream Budget and the interest cuts, but it is still sinking. And there are no signs of any upward movement in industrial performance.

The Indian economy is following in the wake of its polity, which, to put it bluntly, is in chaos. And it is a pity the government has lost its grip on the economy too.