Sunday, June 21, 2009

The Stock Exchange Obsession

Every body these days has a new hobby – predicting when the economic downturn or recession or meltdown or slow down or whatever will end and as a corollary they are also predicting the rise and the fall of the Sensex; in fact its rise. Sensex to cross 21,000 by December 2010 screams one headline, while on the business channels, talking heads in suits and ties and with a clipped accent speculate on the same thing. They could well be astrologers; except that astrologers usually have ash smeared on their forehead and sit on a gaudily decorated stages or dais from where they can give darshan and distribute gyan.

I for one feel rather uneasy with this constant Sensex gazing from morning till night; with a ticker running down the bottom of most television channels indicating which stock is up and down. Indeed arguably, it is not cricket but the stock exchange that is the media’s abiding interest. And it is a misplaced interest and priority. For in a population of a billion plus people, just how many people really invest in the stock market directly or indirectly? Just two per cent of Indians invest in stocks through the stock exchange and are affected by its hops and skips though monitored with closer interest than the ECG of a patient in critical care.

More people put their money in various micro finance schemes run by several micro finance institutions than in all the country’s stock exchanges together. And though investment in stocks is touted as the way to get wealthy, that works mostly for those who are already middle class or wealthy. But in terms of scale, micro finance is fast emerging as a hot opportunity for global players with an estimated USD 20 billion to be invested globally and around USD 3 billion in India, by 2010. The volume of total micro finance loans globally rose from USD 4 billion in 2001 to around USD 25 billion in 2006, according to a research recently conducted by Deutsche Bank.

So does micro finance make people rich? Arguably no, though it is certain that by making banking facilities available at the doorstep of a strata of people that banks would not normally touch, it is surely keeping them from becoming poorer, often making savings and credit available. Soft loans do remove cash poverty, but only elusively. Unless loans are converted into investments in on-farm productive activities, rural poverty will not go away.

But although micro credit may have its chink, it touches many, many more lives economically than the Sensex does, and so the Sensex has huge limitations as an indicator of development. After all, economic growth has to include the welfare and development of the country as a whole? The reach of the Sensex is limited to the rich and middle class who invest there..even if the Sensex keeps reviving at this current rate and captures the measure of the eradication of poor rather than the poverty, the success of India will not be measured appropriately.

The Sensex is nothing but a mirage of the economic growth of our country representing something that is there but never achieved. We, as the citizens of the country, need to wake up and learn that the Sensex is not reliable and it only indicates that we are getting richer from the surface and poorer from the core. If the basis of our very development is hollow from inside any milestones or success achieved will be extremely short lived and will vanish before we know it.

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