The Telegraph
Since 1st March, 1999
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Vajpayee propagates equity cult

New Delhi, Jan. 17: If it takes a Prime Minister to set stocks ablaze, Atal Bihari Vajpayee’s spark was not enough to ignite the sensex, but just the fuel to fire investor hopes of better days ahead.

“We should all make efforts to motivate savers and investors to put their money into shares and bonds so that the economy benefits from a vigorous capital market,” the Prime Minister said while launching an awareness drive for the Securities and Exchange Board of India (Sebi). His words did not send ripples through Dalal Street, where the sensex closed with a three-point loss at 3370.39.

The Prime Minister’s attempt to deepen the equity cult comes after the Joint Parliamentary Committee indicted government regulators and companies for their failure to head off a scam that left investor faith in tatters.

“The Indian householder, of late, has been putting much of his savings in non-financial assets. Even in financial assets, a large chunk is going into the banking system. This is not the best or the most productive use of our savings,” the Prime Minister said.

If Vajpayee-talk is a sign of the thinking in top echelons of the government, small investors have much to fear: Budget 2003-04 could devour tax sops on bank deposits and small savings, at least partially. This has been a touchstone of the Vijay Kelkar Committee report.

The BJP has never been happy with the proposition — a party committee headed by Rajnath Singh has slammed Kelkar’s recipe. The final say, however, will rest with Vajpayee and the finance minister, who together decide what the budget looks like, not party MPs.

At the heart of Vajpayee’s worries is the fact that savings are not being used for investments. Proof of it lies in banks’ burgeoning deposits, despite repeated cuts in interest rates. On the other hand, cheap money has not been enough of an inducement for firms to borrow.

Banks have, therefore, concentrated on retail sector — home finance and consumer-purchase loans.

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