.d.
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Growth Suppressed, Parasitism to the Fore
At the start of 2004, the Government is making a desperate effort to whip up a sense of euphoria about the state of India's economy. The mass media have been making out that there is a basis for the euphoria. Stock prices have risen at breakneck speed — the Bombay Stock Exchange's Sensitive Index (the Sensex) has doubled between late April 2003 and January 2004, and foreign institutional investors are bringing in large funds. Corporate profits appear to have picked up in the first three quarters of the financial year. The foreign exchange reserves have risen by an unprecedented $30 billion over the last year, and have recently crossed $100 billion amid much celebration. The Central Statistical Organisation projects that GDP (Gross Domestic Product) growth in the whole year might touch eight per cent. Amid such seeming achievements, the finance ministry has coined the slogan "India Shining" for its media campaign; the Government is rushing to spend Rs 500 crore (Rs five billion) of public funds on this campaign; and elections will be held in April. The press and electronic media too have been retailing the Government's slogan relentlessly in their reportage.
The sudden growth of the foreign exchange reserves is not an achievement to boast about. It is largely due to the huge influx, through a variety of channels, of foreign speculative capital, which sees the opportunity to make huge gains in India's financial markets. On the other hand, when these funds are added to the country's foreign exchange reserves, they have to be invested abroad by the Reserve Bank at a rate of return of just one or two per cent a year. Further, foreign investors can draw these funds out as fast as they have brought them in, with devastating effect.
The stock market boom is driven by such foreign speculators, who, with the $30 billion (net) they have brought in since 1992, dictate the movements of share prices. They reportedly hold 45 per cent (by market price) of the 'free float' shares (ie those shares that are ordinarily available to investors) of the Bombay Stock Exchange.1 It is estimated that they hold 30 per cent of the shares of the top 10 Indian companies, and 20 per cent of the top 50 Indian companies.2 However, such foreign investment in India's stock markets has not given any boost to productive investment by the Indian corporate sector in the 1990s.3
In fact the entire "India Shining" campaign is a cheap statistical fraud. There is no significant turnaround in the economy as a whole. The actual condition of the people and their productive future — the only real measure of economic performance — is appalling.
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