What is the Finance Minister of India trying to do?
If you ask me I will say – He is preparing for Elections rather than try to save the fundamentals of the economy. He is bullying the banks to cut interest rates; trying to paint a bright picture to hide the gloomy reality of Indian Economy and it’s future.
When the IIP showed dismal figures in Sept’08, he was prompt in dismissing the IIP data saying the “data set” does not correctly reflect the business. But this was the same “data set” and same IIP figures that FM and others in the Govt. used to project the splendid growth India was having in their rule!!!
When Inflation rose and public was attected, immediately exports of major items like sugar, non-basmati rice, etc. where banned to contain the price. This was done to ensure public (common man) did not suffer hardship. But when the FIIs & other foreign entities used the route of short-selling and the market fell like nine-pins, FM & SEBI Chairman just issued warnings. Why was Short-selling not banned? May be the biggies and powerful will suffer if short-selling was banned. Utlimately like in any market crash the common man suffered the most this time also. But other than just giving press releases and comments, FM has not taken any steps to protect the Common Man.
Shares of companies which issued IPO at high prices are now at prices less than one-third of the IPO price. What is the FM doing to protect the common man from such frauds? Indeed Indian Securities Market is a Free Market but such wide variations in valuations must be probed and all parties including the Merchant Bankers must be taken to task.
Now the FM is forcing the banks to reduce their lending rates. With the current deposit rates, reducing the lending rates will reduce the margin for the banks and prove to be a risk for the banks esp. if the economy worsens further and deliquency rates increase. It will have a negative impact on the capital adequacy of the banks.
Like most politicians (I will say, most people) of this generation, FM is also short-sighted. Saving today is more important even at the cost of tomorrow.