In “Stop fuelling price controls” (Mint, 6 June), you have made a sensible suggestion that the government should have gradually increased fuel prices over the past year as global oil prices began to harden. However, that’s easier said than done as the Left parties have objected to literally every move of the government. It was far-fetched to assume that they would agree to such a step. For how long will oil marketing firms continue to bleed? As consumers, we will have to bring an attitude change in our approach towards fuel consumption, for we cannot keep burning it forever and, that too, at ridiculously low prices. We have to save it for the future. For starters, we can use public transport to commute instead of wasteful individual trips in personal vehicles.
I read the Capital Account column (Mint, 11 June) with interest. “Decoupling” is an issue that’s important to me and, hence, I could not resist writing. I have had several debates and discussions with my fellow colleagues in the industry — other strategists and heads of research in brokerage firms.
The coupling-decoupling conundrum is, in my opinion, misunderstood by a large number of people. What you wrote in your article is more popularly expressed in my business as “Indian economy is decoupled, but the capital markets are still coupled”. My point is that it’s not about the coupling-decoupling of economy and capital markets vis-a-vis the US, but it is the coupling between the capital markets and the economy within India.
In other words, capital markets in India are not the true representation of the Indian economic structure (in terms of GDP, etc.) today. I often quote this test case — if, tomorrow, Infosys, TCS, Wipro and Satyam shut shop, let’s understand what will be the impact on the capital markets vis-a-vis GDP for next year. I dare to argue that while the stock market will get decimated, GDP growth after taking into account the wealth multiplier effect of such businesses will still clock a healthy 6%. So, the point I am trying to make is that we should avoid this pretence of our capital markets being a true manifestation of our economy. In developed markets such as the US, consumer discretionary spending and health care spending constitute the majority of GDP, and true to that, companies representing these sectors have the highest representation in market capitalization.
We tend to use a traditional mature economy brush to paint the Indian canvas and that’s a mistake. I tell most of my clients who are foreign institutional investors and come to me asking for macroinvestment themes in India that fundamentally you could be “long” on the Indian economy, but that still does not mean you have to be “long” on the Sensex or the Nifty.
In India, foreign flows are still the only true indicator for market performance. Sentiment drives foreign flows and headlines drive sentiment.
— Praveen Chakravarty
The finance minister’s counter-attack on the Bharatiya Janata Party (BJP) (“Policy limbo, political attack”, Mint, 9 June) is quite justified. In the context of high crude oil price, there was no alternative to the price increase. Had the BJP been in power, it would have done the same thing.
Therefore, the BJP’s statement of “economic terrorism” smacks of opportunism and deserved the retaliation. As rightly pointed out by you, the United Progressive Alliance (UPA) squandered surpluses on populism and does not deserve sympathy either. It benefited from the lag effects of the reforms initiated by the previous government. Postponing price increases of petroleum products was, however, an invention of the National Democratic Alliance which the UPA copied.
— Sura N.