Leave It Alone

The reaction to the slump after the Budget was uncalled for, as are the steps announced last week for boosting the sentiment on the bourses. Stock markets are supposed to be a thermometre of sorts, which reflect the state of the economy's health. If the thermometre shows a higher temperature, surely one doesn't start calibrating it. Nor does one go about repairing it. What is needed is an examination of the patient. Tinkering with the measuring instrument is unlikely to help.

Surely the stock markets need to be studied and examined periodically. Though there can be something wrong with the instrument too. If I were the finance minister, I wouldn't ask Montek Singh & Co to talk to equity analysts and large broking firms. Instead, I would have asked them to identify, in each of the six important centres, about 50 investors having equity holdings worth Rs 1 lakh to Rs 5 lakh each, with the stipulation that each group of 50 must comprise people from different walks of life.Have their savings gone down? Why are they not applying to new issues? Where are they parking their savings? Large brokers and equity analysts do not need to be disturbed at all.

 

In any case, where is the need for boosting the stock markets? The government needs to appreciate that an economy generates surplus in a given year. It doesn't really matter whether the surplus is put in a bank or is invested in stock markets. The basic idea is to use the surplus for creating productive assets. Of course, some sort of balance needs to be maintained between different channels