Editorial 1
Editorial 2
Competition mild success
Letters to the editor


Future Shock

A new chapter opened in the history of the Bombay stock market with the introduction of futures trading on Friday. Individuals can now buy and sell index futures on the 30-share Bombay stock exchange sensitive index. Money will now change hands as punters differ on their predictions of the future value of the Sensex. Those with relatively optimistic predictions about the future value of the Sensex will buy the futures index from those with more pessimistic expectations. Since the futures market has just started functioning, there was very little trading with most of the trading restricted to the 30 day or BSXJUN2000 index — only two trades were conducted for the BSXAUG2000 index. However, in due course, activity is bound to pick up as operators become familiar with the mechanism.

The futures markets are an important component of stock exchanges all over the world, and there is no reason why the Indian market should be any different. The moralists may object to futures trading on the ground that this is just another source of gambling. But, this somewhat blinkered view ignores the fact that futures trading also plays an important role. The Indian stock market is an extremely thin market, and is subject to absurdly wild fluctuations. Hopefully, the introduction of this trading instrument will help to smooth out some of the fluctuation. The Securities and Exchange Board of India and the other regulatory bodies must accelerate the development of other derivative products in the Indian financial system.

This is perhaps also an appropriate moment to ponder over the peculiar behaviour of the Indian stock markets. The current price of the Bombay Sensex is hovering around 4,650, whereas it was approximately 4,200 in early 1992. In other words, there has been only a 10 per cent increase in the value of the Sensex during this rather long period. What is even more surprising is that the Indian economy has performed extremely well by all conceivable criteria. National income at constant prices has been increasing by over five per cent per year. Even at the best of times, this is a respectable rate of growth. It becomes even better when one remembers that the world economy has been passing through quite difficult times for a significant part of this period. One may argue that it is not appropriate to take the current value of the Sensex. The Sensex was after all just about to touch the magic figure of 6000 just a few months ago. Then, the Dow Jones index and the National Association for Stock and Automated Dealers’ Quotes plummeted, bringing down the value of the Sensex. This argument cannot be dispensed with easily because financial markets the world over are intricately interlinked. Stock indices in most countries have come crashing down in tune with the Dow and the Nasdaq. But, even if the current value of the Sensex is taken to be 6000, this would still represent only a 50 per cent increase in its value during the Nineties — the Nasdaq increased by 600 per cent over this period. Perhaps the most important reason behind moribund performance of the Sensex will be the panic generated by the Harshad Mehta scandal. The steep fall in the Sensex after the scandal was detected drove the small investor away from the stock market for several years. Of course, one has to wonder how one individual could have such an impact on the entire country’s stock market. Fortunately, the increasing importance of the institutional investors has brought about some order into the market.    


Spaced Out

There are evictions and evictions. Veteran Congressmen being asked to vacate their premises by the urban development minister, Mr Jagmohan, and the same ministry — equipped now with a fleet of bulldozers — summarily evicting migrant labourers who have encroached upon government land may look like very different problems, or solutions. But both scenarios bring to focus the legal, ethical and pragmatic problems that encroachments pose in trying to tackle the fall in living standards in India’s major cities. The entire issue of the eviction of slum-dwellers has now become identified with the former prime minister, Mr Vishwanath Pratap Singh. Mr Singh’s taking up of this cause, embodied in the Wazirpur settlements, is perhaps not entirely disinterested. The growing numbers of the urban migrant poor would constitute a vote bank well worth wooing for what aspires to be the third front.

The case for eviction is clear., since the social cost of encroachment affects almost all spheres of the economy. Quite unequivocally, encroachment is criminal misappropriation of government property which, if unchecked, sets up its own kind of vicious circle and power nexus, often ending up glorifying the lawbreaker as a human rights victim. But given the wider context of the various factors determining largescale migration of a labour force from the villages to the cities, Mr Jagmohan’s “clearance-cum-development” drives would need to put on a human face. This is possible within the limits of legally uncompromising eviction procedures, keeping in mind the levels of poverty and illiteracy among the evicted. And this is perhaps the strongest element in Mr Singh’s argument, particularly his emphasis on the implementation of rehabilitation projects. If urban development exploits migrant labour, then the civic authorities cannot entirely evade the responsibility of accommodating this labour force without spreading squalor in a city. The crux of the matter lies in the difficulty of humanizing eviction without simultaneously appearing to legitimize encroachment into some sort of a fundamental right that has to be protected by the state.    

Some time ago, the Centre set up yet another “high level” committee. As a side, one could well ask why it is necessary to set up “low level” committees at all. However, the purpose of this committee was to advise the government on policies to stimulate competition.

I cannot help being mildly caustic on whether it was at all necessary to set up a committee of “experts”. After all, the government has a rather large number of economic advisers on its payroll. These advisers must be pretty incompetent if outsiders have to be called in to advise the government on every issue. Perhaps someone should put together evidence on the number of committees set up each year, the amount of money spent on these committees, and the number of reports on which action has been taken.

The chances are high that this committee’s report will simply gather dust in some Union minister’s office.

The committee has recently submitted its report, accompanied by various supplementary and dissenting notes. If a nine member panel can produce such a range of views and opinions, then it is extremely unlikely a multi-party coalition government, which seems to find it increasingly difficult to proceed ahead with any degree of cohesion, will be able to come up with a common agreed policy.

Of course, one dissenting member of the committee has expressed the hope that the report will at least encourage debate on this issue. This purpose has certainly been served.

Competition policy has become the flavour of the month with newspapers and magazines devoting considerable coverage to the committee’s report. The committee has recommended setting up a competition commission of India that will essentially define the rules of the game governing fair play, have the right to hold summary trials and review orders of other regulating authorities.

It has also recommended that some existing legislation, such as the Monopolies and Restrictive Trade Practices Act, be repealed and has mooted a proper exit policy to ensure the closure of inefficient enterprises.

The report also suggests there are three broad situations when there is a case for regulatory authorities to step in and intervene in order to prevent barriers to competition.

The first is when there is collusive agreement among enterprises, the purpose of such collusive agreements presumably being to forestall price competition. The second is when a dominant firm abuses its market share in order to fleece consumers. The third situation is when mergers between firms again threaten to retard competition.

Of course, these suggestions make eminent sense. No one can seriously question that the prevention of collusive pricing or abuse of monopolistic market power must be a basic element of any set of policies designed to protect the interests of consumers. But did we really need a committee of experts to produce these suggestions?

Most countries have explicit rules that are designed to prevent collusion or abuse of market power. The difficulty has always been in enforcing these rules. After all, two or more firms do not publicly announce that they have an implicit agreement not to undercut each other’s prices. Moreover, the mere observation that some firms’ prices are moving in tandem is not sufficient to conclude that the firms are colluding.

It may be slightly easier to detect the abuse of market power by a dominant firm. Certainly, the regulators of the United States seem to have been successful in bringing Microsoft to book. Possibly this was because Microsoft was too blatant in its attempts to exploit consumers. There may be a hundred smaller “Microsofts” who have evaded the attention of the regulatory authorities.

So the usefulness of the report has to be judged by whether it has any concrete suggestions in so far as implementation of rules are concerned. Unfortunately, this is where the report is quite disappointing. It has reposed its trust in the proposed commission — the competition commission of India. But, how will the committee detect unfair practices and punish offenders? The committee has nothing much to offer in this matter.

Perhaps this has prompted at least one of the dissenting notes. The economist, Rakesh Mohan, points out that the majority opinion vests too much power with bureaucrats. Mohan argues the CCI should only have an advocacy role during the initial period, so as to give bureaucrats some breathing space during which they can be provided suitable training in the implementation of the rules of the game.

However, the meaning of “advocacy” is particularly obscure in this context. Are the commission members supposed to go around the country preaching the virtues of competition? If preaching is all that it takes to convert hard boiled industrialists, then no country would require elaborate anti-trust laws.

But perhaps this is a slightly uncharitable interpretation of Mohan’s remarks. He is clearly opposed to vesting the commission with too much power. His suggestion about an “advocacy role” has been made cleverly in order to prevent the commission from seeing the light of day.

Many people will agree with Mohan that the powers of Indian bureaucrats should be curbed — let us not forget India ranks among the most world’s most corrupt countries. It is not a good idea to give Indian bureaucrats the dual role of prosecutor and judge. This opens up enormous opportunities for harassment and bribes.

Is a new competition policy at all necessary? P. Narielwala, one of the members of the committee, has pointed out that the Securities and Exchange Board of India takeover code and the Companies Act are sufficient to control undesirable mergers.

Also, the feeling is that most Indian companies are quite small by international standards. With the gradual dismantling of quantitative controls on imports, Indian companies will face increasing competition from foreign firms.

This line of argument suggests that some amount of consolidation of Indian firms may be necessary in order to enable them to reap the economies of scale without which they cannot survive international competition.

It is also possible to argue that the most efficient way of promoting competition is to remove all barriers to entry and exit. The committee has provided some lukewarm support for this hypothesis by recommending the gradual removal of exit barriers.

Perhaps, the best insurance against collusive practices in the domestic economy is the removal of entry barriers in so far as foreign firms are concerned. International competition will not only force Indian firms to become more efficient — it must also contribute towards lower prices.

Of course, the left will argue the last thing one should do is to pin faith on multinationals. However, in a vast number of industries, there are simply too many firms in the world. It is not possible for all of them to coordinate prices, or even to enforce agreements to collude. Even the relatively small number of Organization of Petroleum Exporting Countries have often found it impossible to maintain oil quotas. There is no reason to fear that multinational corporations will be able to hold the entire world to ransom.

The author is an economist at the Indian Statistical Institute, New Delhi    


Don’t ask and I won’t tell<\h3>

Sir — South African cricketers have a masochistic streak. Hansie Cronje needn’t have confessed and no one would have doubted he was innocent. Both Herschelle Gibbs and Henry Williams needn’t have said that they had accepted Cronje’s bribe of $ 15,000 each for playing badly (“Gibbs blows Cronje defence”, June 9). Cronje didn’t tell on them, there was no witness and ultimately they didn’t even keep to the agreement. So why, unless they are gluttons for punishment, did they squeal? Look at the completely different scenario in Indian cricket. Manoj Prabhakar has turned blue in the face from screaming that Kapil Dev offered him money. But will Kapil ever confess? He knows there is no way to prove he committed any crime. Like with Cronje, Gibbs and Williams, there were no listeners to his conversation with Prabhakar. But isn’t it only natural for Kapil to deny any wrongdoing? No criminal will ever admit his guilt. The Indian cricketers in this sense are extremely sane, no matter that in the process they destroy cricket.

Yours faithfully,
Jagmohan Sethi,<\b>
New Delhi

Pressed for truth<\h3> n

Sir — Rakesh Sinha’s article, “Let the saffron voice be heard” (June 7), raises a question. How does the average reader react to the national English press? The answer to this lies in the popularity of these dailies. Despite Sinha’s paranoia, the truth is that India has a much evolved press which maintains its objective approach in its news features as well as analyses. The publication of Sinha’s article authenticates this.

As an average Indian reader, I cannot comment on the historical delineation of the philosophy of the Rashtriya Swayamsevak Sangh or the evolution of the attitude of the “English press” to RSS ideology and practice. Yet it is a fact that the patriotic fervour aroused by the RSS during the freedom struggle did add to the spirit of rebellion. It served a purpose. Now devoid of a goal to fight for, the RSS is focusing on a non-existent threat and trying to destroy the secular attitude of Indian citizens through mass hysteria. By keeping quiet or at times justifying the RSS’s actions and by allowing its leaders to be seen publicly with those of the sangh parivar, the Bharatiya Janata Party is egging them on.

It is appalling to note Sinha’s concern at the banning of shakhas, while there is absolutely no reaction to the way the peaceloving Christians are marginalized, beaten up and butchered. Violence against Christians almost seems to have become a part of Indian life. Yet the country goes on reaping the benefits of the work done by the Christian missionaries, especially in the field of education and healthcare. Overenthusiastic conversions can be regarded as an irritant but it is unlikely that the community would use religion as a political weapon.

If newspapers do not laud RSS activities, it is because the deeds speak for themselves. It is unlikely that all the editors are non-Hindus and biased. Sinha should realize Indian readers are not idiots, incapable of independent thinking. And he seems to be unaware of the regional dailies, particularly the reporting done by those in the south. Has he confined himself to only the sangh parivar sponsored vernaculars?

Yours faithfully,
Sajni Koruth,<\b>
Calcutta n

Sir — Rakesh Sinha rightly notes the bias of the English press. The paranoia is evident with regard to the RSS. Precious newsprint and editorials have been used to deride the sangh parivar and its ideology. The actual information about the RSS is largely censured. This is the reason the RSS has been unable to get its legitimate place in academics and the media despite showing remarkable growth at the grassroots level.

As Sinha notes, much of this has been possible because of state patronage to the anti-RSS forces. And yes, it was probably Jawaharlal Nehru who started the trend. Nehru’s fear of the RSS is understandable since the RSS was opposed to his leadership and was closer to his arch-rival, Vallabhbhai Patel. The RSS has been and is being made to pay the price for its ideological determination. Sinha has also rightly exposed the hollow claim of the English dailies about their impartiality.

Yours faithfully,
Pranab Ranjan, <\b>
via email n

Sir — One has heard that seeing is believing. But as Bhaskar Ghose points out in “End of the world news” (June 3), seeing most of the times these days is disbelieving. Media journalism has never been more insensitive than it is now. The best reporter is one who can bring out the sauciest details or concoct a sensational story. It never occurs to the intellectual “czars” of the media that they are very irresponsibly converting young people into sadists who derive pleasure from other people’s suffering.

Television channels vie with each other to collect gory details from news stories. Ironically, there is no censor for live reporting. Yet, given the media’s access and reach, how different it would be if media intrusion was aimed at correction of society.

As a reader and a viewer, I feel terribly disappointed to find the media merely criticizing the country. It would be wrong to say there are no problems, but to say there are only problems is cheating. Lashing out at the authorities gives the media more mileage. But how long can this go on? I agree with Ghose that we have to work towards reformation with correct information.

Yours faithfully,
Sarita Kejriwal,<\b>
Calcutta n

Sir — Bhaskar Ghose shows how public emotions are swayed by the media. Exaggeration and repetition of news stories is what the public loves and the media plays to the gallery. But the media need not take the blame alone for distortion. The indifference that Ghose speaks of is part of the larger organizational culture. Our ministers who show their patriotism in Parliament and in rallies are futile representatives of a society where change has become a chimera. The apathy characteristic of the media is congenital to India and its people.

Yours faithfully,
Anibrata Biswas, <\b>
Asansol n

Sir — The Central government is contemplating a prevention of terrorism bill. The English media seems unduly concerned this will affect the freedom of press. The first question that can be asked is how responsible and fair does the English media think it has been. When thousands of Kashmiri Pandits were murdered and terrorized, the English media remained silent. Similarly, when Hindus were butchered in Punjab, a strict silence was maintained. Ironically, when militants are killed an orchestrated hue and cry is raised against human rights violations. Doesn’t this point to the handiwork of vested interests in the media?

There is again a definite bias working in favour of the largest minority community in the country. How else can the reasonable and secular demand of the enactment of a uniform civil code and Article 370 evoke such a maudlin response in the media? Journalists again are known to promote their own interests through the media. So whose freedom are we talking about when we talk about the press? Hypocrisy and doubl