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The Agra tea party How far can Vajpayee     and Musharraf go? The Amma-Didi factor The war of the CMs End of the party

The heartache overshadowed by a summit

Bill Clinton is a man who read international politics in Oxford. Yet, during his run for the presidency in 1992 he studiously avoided all attempts to engage President Bush in a debate on foreign policy. The reason was summed up in a huge banner strung up in his campaign headquarters: 'It's The Economy, Stupid!'

The point being made was that international issues take second place to concerns about the pocket. I agree, and Clinton's victories in 1992 and 1996 provide ample empirical evidence. That is one of the reasons I shall leave it to others to debate the success or otherwise of the Agra summit.

The other reason? Well, last week, my first paragraph read in part: 'Kashmir, that perennial bugaboo, is sure to be on the agenda, but there is little chance of any solution. (Maybe I should say 'no chance'!)' Any student of history would have reached the same conclusion. So all the post-summit regretful disappointment is really quite unwarranted.

I would like to focus on a crisis for which you certainly cannot blame either the Pakistani Army or the Lashkar-e-Tayiba. I refer to the Unit Trust of India crisis, a self-inflicted economic wound. It may sound insensitive, but this is probably an issue which is of greater immediate concern to the average Indian outside Jammu & Kashmir.

You may know the consequences of the Unit Trust of India's decision to stop trading its US-64 scheme. Roughly 20 million (two crore) Indians have suffered. I understand that about 91 per cent of the victims belong to the middle class. Many of them had bought units at a price of Rs 13 or so; today, they will be lucky to get Rs 10 for the same.

It is not just a matter of three rupees. Your neighbours might have found that there is suddenly no money for a wedding, college fees, or an operation. These stories may not make the headlines, but the heartache is very real for millions across India.

But have you considered the other consequences? Let me put it in one sentence: the public crisis in confidence has left India's markets at the mercy of foreign money. Operators from abroad can now pick up good scrips at a laughable price.

How many people realise that the biggest Indian player in the exchange is -- maybe I should say 'was' -- the Unit Trust of India? Once it was rocked, the Sensex was bound to tumble quite a bit. And with nobody else having the sheer muscle of the Unit Trust of India, foreign institutional investors can rush in. Quite frankly, I will not be in the least surprised if some of them post profits of 30 per cent this year! (Do remember that the markets will recover from the first shock eventually.)

This brings me to the original sin. Forget about the Unit Trust of India, and whether its investments were correct or not. (What would have happened had it not picked up infotech stocks? It would then have been damned as a stick-in-the-mud organisation!)

The real problem is the manner in which a bear cartel has been leading the Indian markets for the better part of the past year. There is an old rule of the market -- something true ever since stock exchanges were invented -- that everybody benefits when prices go up, but some operators make profits even from a falling market.

There is undoubtedly an element of artifice if the Sensex suddenly zooms up to the 6000 mark. But the other side of the coin is equally true -- there is something shady if it suddenly falls to 3300. And it did not take a genius to figure out that the Unit Trust of India could not make a profit if the Sensex dipped below the 4000 mark.

The Union finance ministry could not have done better by the bear lobby than if it had been scripted. Its attack on the bulls in the market had an effect -- and let me add that some corrective action was required. But the complete inactivity when it came to the bears was truly shocking.

The ministry should have taken some step to leash the bears as far back as March or April. Please do not tell me that the drop in the markets came as a complete surprise. Has everybody forgotten the manner in which the markets suddenly fell within 24 hours of the last Union Budget being presented? What action, if any, was taken after that lamentable episode? It was the bulls, not the bears, who came under the investigator's lash!

I am willing to accept Finance Minister Yashwant Sinha's admission that he was kept in the dark by his officials. But this is small consolation to millions of small investors. Even the recently announced remedial measures, resuming trade in US-64 and so on, cannot undo all the damage. Nor even most of it. The confidence of the small investor has been shaken.

Ask yourself this: are you, the reader, more confident or less confident that you will get adequate returns from the market after the UTI debacle? Will you now entrust your savings to any Indian mutual fund, or are you now more likely to pitch for a foreign organisation? (Assuming, of course, that you are even remotely willing to trust the markets any longer.)

The market needs to be jumpstarted. I am not saying this because I have any great sympathy for the market operators; they can stomach the loss and live to fight another day. But the thought of the Indian economy suddenly becoming exposed to foreign operators with companies being sold for a song makes me queasy.

The Government of India accepts that it cannot let down its guard on the Pakistan border. But that shouldn't mean that the doors of the economy are left without wardens.

T V R Shenoy