By K Raveendran
The stock market seems to be in a great hurry to pronounce the end of the Covid crisis. This week headline indices clocked new records, with Sensex soaring past 60,000 and the Nifty inching close to the 18,000 mark. The temporary scare of the collapse of the Chinese real estate giant Evergrande as well as the prospects of central banks ceasing their support programmes launched in the aftermath of the pandemic have not weighed down the markets, not only in India, but all over the world.
For the statistics-minded, it took barely half the length of time that was required for Sensex to add 10,000 points compared to the time taken to travel the same distance previously. While it took 609 days for the previous 10,000 points rally, the latest one took just 246 days. If the block is further reduced to 5,000 points, the pace was even more frenzied: just 42 days. Incidentally, it took 204 days for the previous 5,000 points to be added.
The Indian stock market has apparently brushed aside the concerns of the debilitating impact of Covid on the real economy as it shows a complete disconnect with the ground realities. This is not restricted to the domestic market, which of course has been showing incorrigible optimism. Overseas investors have also been sharing their confidence. In fact, according to reports, while domestic Institutional investors bought shares worth one billion dollars worth of stocks in the last four sessions, foreign portfolio investors pitched in nine times more so far this year, reflecting their unflinching faith in the country.
It is nothing less than puzzling that when the economy has been down in the dumps, the market has been showing completely contrarian tendencies. The GDP estimates are supposed to have dropped by over 23 percent during the April-June quarter when the crisis began to bite, with the same trend continuing over the subsequent quarters. But the market index has been on a reverse swing, showing the extent of disconnect between the two.
Even more worrisome is the fact that this has been mostly on account of transactions in the secondary market, which has no bearing on the production or wealth creation in the economy. This is as good as paper trading that does not originate in productive processes. Additionally, the amount of money raised in IPOs this year has reached $8.8 billion, already surpassing the totals of the past three years until August. According to estimates, at the current pace, 2021 would exceed the all-time record of $11.8 billion.
Naturally, the beneficiaries do not represent the cross section of the people, who have been at the receiving end throughout the lockdown as well as the difficult phases that followed. This is not the story of migrants who traversed vast stretches of land to go back to their homes because they lost all their means of livelihood, the protesting farmers or the even expanding army of jobless.
The real tragedy is that this dichotomy is visible not just in the stock market. In fact, it is the sign of a systemic failure in governance, directly attributable to the wrong policies of the Modi government. It is not skin-deep, it has spread like a dangerous cancer that causes degeneration in every cell of the body of the national economy. The stock market boom is anything but real and camouflages the real state of the nation and its economy.
It gives us no consolation that the devastation caused by the deadly pandemic has not affected the rich people, who continue to flourish under the skewed polices of the government. The stock market is a true reflection of this aberration. The chilling paradox has been exposed time and again. Studies have shown how India’s rich-poor divide increased during the Modi government’s rule, making the country one of the most unequal nations in the world. Inequality has been rising sharply, with the richest having cornered a huge part of the wealth created through crony capitalism and connections to the powers that be.
The rich are getting richer at a much faster pace while the poor are still struggling to earn a minimum wage and access quality education and healthcare services. The inequality has accentuated under the Modi dispensation, justifying claims by leaders such as Rahul Gandhi that the prime minister’s obsession continues to be on how to help India’s rich and the resourceful make more money, irrespective of what happens to the rest of the people. (IPA Service)