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He had an investment of Rs 48lakh as on last Friday. More than half of this was in physical shares where he had taken delivery of shares and around Rs 20 lakh; he had paid as margin money to buy some stocks in futures segment. India is growing at around 9 per cent. There was no reason to believe that the situation would change so dramatically over the last two days. He was asked to pay additional margin money on Monday and Tuesday, which he could not. On Tuesday evening, his broker called to ask him pay another Rs 3 lakh. A net loss of Rs 511akh and no shares in any company.

Two days of carnage in the stock markets have wiped out many investors like him. What took years to build in terms of investor confidence was destroyed in two working days. However, the writing on the wall was clear all along. But everyone failed to read it. The government intervened on Tuesday when the bloodbath on Dalal Street spiraled out of control.

Here are some facts:
Following the weakness in the global financial market, the Indian market was under sustained correction since January 15.

Experts are no longer hesitant to accept that the US market, which is still the centre of gravity of the global financial market, is recession-hit. And that its impact is bound to be felt across the globe including India, irrespective of the fact that ours is a robust and growing economy.

While no one doubts the impending correction, the question is the pace. The overwhelming response of Reliance Power’s Initial Public Offer (IPO), gave enough strength to the bear cartel to trap the market. The Rs 10,200 crore IPO bids worth Rs 7, 45,353 crore and by Friday evening, investors had taken out Rs 112,063 crore to apply for the IPO. This includes small investors - Rs 11,327 crore, high net worth individuals (HNI) - Rs 49,949 crore and Rs 50,787 from institutional investors.

This figure was available for all to see on Saturday morning: there was hardly any cash available with the investors. Even the regulators, banks and the government must have been aware of this. If retail and HNIs have invested over Rs 61,000 crore and locked it I in for three weeks till the time for the refund, could it be possible that the market could have remained strong and not be vulnerable to such people?

Since the market has witnessed sustained selling for the whole of the previous week, it was obvious that all the players in the futures segment needed to fork out additional margin money on a daily basis, which they were doing since January 15. On Black Monday, January 21, the bear cartel got a whiff that the market had crashed out completely. They hammered it down further. For obvious reasons, the default in the margin money had a cascading effect.

The turn of events played out exactly the same way. While Foreign Institutional Investors were on a selling spree to reduce the global losses, the margin call created havoc in the market. Brokers had to sell part of their clients’ shares to meet the margin requirement, since the demat account was also linked with them. But fresh selling pulled down the price further. This generated a fresh requirement for margin. While banks refused to give additional funds to meet the margin, they started asking their borrowers to pay additional margin as per the Reserve Bank of India stipulation for loans against shares.

Since the share price was falling, the banks needed an additional margin and its executives had no option but to sell the shares given as collateral to recover the margin. This created fresh selling pressure and additional fund requirement to meet government stipulation. As there were no buyers in the futures market, the investors had no option but to give additional margin money at every fall.

After brokers started defaulting on margin payment, the stock exchange started switching off their terminals. In fact, everyone was following the prescribed law, which, in turn, was helping the bear cartel, which had been trapped many times by the same heavyweights.

Had the government not intervened on Tuesday, the crisis would have continued for the third day as the FIIs were continuing to add fuel to the fire. Despite the fact the Indian market was hitting new lows; the FIIs were on a ruthless selling spree. They are discerning fund managers and we cannot accept or believe that they adopted a herd mentality.

No one in their right sense, no one with even a rudimentary knowledge of the stock market would sell in such a market which was sinking so rapidly. But the selling went on as there was no tomorrow. The selling at this level reflects that the problems in FIIs’ home countries are far more serious than what perceived. In the two days of meltdown, the FIIs sold more than Rs 7,500 crore.

 The question is if these banks could relax the norms on Tuesday, then why did not they do it a day earlier? Were they not aware of the ground reality, which was in the public domain? Had they done so, it could have helped in arresting the collateral damage it caused to investors but also to the market, which is an intermediary to raise resources to create capital. While the bear cartel had the last laugh, it will take some time to woo these investors back into the market and join the growth story. 

As we prepare to celebrate the 59th anniversary of our Republic, we are justifiably proud of the success of our often anarchic democracy. But amid the pomp and pageantry, statistics in the latest UNICEF report on India’s children should be a sobering thought. India accounts for 2.1 million children of the 10 million worldwide who die before the age of five. One child dies every three seconds. Of the four million neonatal deaths in the world, one million are in India.

 Comparisons do not serve for much but we have fallen behind Eritria, Ethiopia and our neighbour Bangladesh in infant mortality reduction. While India is a fervent advocate of UN development goals, it now seems a distant dream that we can achieve the target of 7.6 per cent reduction in infant deaths from the current 2.6 per cent. And, this despite the fact that India has had the Integrated Child Development Programme in place for 30 years.

India has every right to showcase its spectacular economic success but this has to translate into a better quality of life for its most precious asset, its people.

There are no magic mantras for achieving this. It’s all there in the myriad of policies for the welfare of the underprivileged. But the proof of the pudding lies in the implementation and that is where we have fallen so woefully short. The fall in child mortality across the world was achieved by inexpensive measures like immunisation, breast-feeding, bed nets and nutrition. More than 42 per cent of Indian children are not immunised and -over 40 per cent of clinics in India do not have a trained person on site during a patient’s visit. The main cause of death among Indian children is malnutrition, an ironic situation given our overflowing granaries. The Prime Minister, an eminent economist, has often spoken about inclusive growth. But the underlying cause for such dismal development indicators is the lack of political will and poor governance.

At the risk of repeating ourselves, politics today has become an end in itself. Of course, come election time or in order to berate political opponents with, the issue of gender equality and child rights is raised. But, there the matter normally ends: Where there is political will, these indicators can be reversed, as states like Kerala have shown. The first Prime Minister of our country, Jawaharlal Nehru, was inordinately fond of Robert Frost’s poem, of which two lines were, ‘But I have promises to keep! And miles to go before I sleep’. The Indian State still owes the promises part of that to its people.

The Exchange rate (ER) is an important policy instrument that affects the economy of a country. During its development phase, Japan, for instance, used the ER to promote exports and improve its economic growth. China has for some time started using the ER policy to improve its economic conditions. In India’s case, when the economy had touched rock bottom in July 1991, P.V. Narshimha Rao, the then Prime Minister, appointed Manmohan Singh as the Finance Minister to revive the economy. One drastic step that Singh took was to devalue the rupee by 20 per cent.

Regarding the rupee, it is not a fully convertible currency. The RBI does intervene from time to time to ensure that the ER is right. That stability of the rupee has been seriously disturbed in the last one year. Since September 2006, when the dollar exchanged for Rs 46.10, the rupee has been consistently hardening. The dollar went on falling and by March 2007, the ER was Rs 44 to a dollar.

The fall of the dollar continued and in April 2007, the exchange rate went down to Rs 40 to a dollar.Thus in just eight months - ending April 2007 the rupee had taken a big jump and appreciated against the dollar by 9 per cent.Of particular interest is the Rupee-Yuan exchange rates. Against the rupee’s appreciation of over 9 per cent by March-April 2007, the Yuan during the same period appreciated a mere 2 per cent as a result of China’s intervention. As a result, in international markets China gained a 7 per cent advantage over India.

The appreciation of the rupee was due to the near absence of the RBI in the currency market to prevent the rupee from hardening. In fact, the RBI closed its eyes to the rise of the rupee. Its main aim was to keep inflation in check. The RBI, therefore, completely ignored the hardening of the rupee that led to loss of market of indigenous industries and increased unemployment.

Foreign capital comes to India from four sources:
a) foreign institutional investors (FIIs) who buy shares of Indian companies;
b) foreign direct investment (FDI);
c) non-resident Indian (NRI) deposits, which are done to take advantage of the higher interest rate in India; and
d) by Indian companies borrowing abroad - external commercial borrowings (ECBs) - to benefit from the low rate of interest prevailing in international financial markets. In 2006-07, the amount of ECBs was $16 billion. With a high rate of interest prevailing in India, ECBs make our industrial units more competitive.

The excessive exposure of the rupee to market forces resulted in the hardening of the rupee very significantly. The loss of exports was heavy in respect of textiles, leather goods and sports goods etc. Information Technology and IT-related industries like BPOs have also been adversely affected. A Federation of Indian Chambers of Commerce and Industry (FICCI) survey brought out that our ex. port turnover was down by 11-16 per cent in chemicals, 10-17 per cent in processed food and agro-products, 20-50 per cent in readymade garments and textiles, 25 per cent in electronics and electrical items, and 50 per cent in machinery. Obviously, it would not be possible to achieve the export target of $ 160 billion for 2007-08 set by the Ministry of Commerce. The figures may come down by 8-10 per cent. This will be a big setback to the economy.

About 11 per cent of the industrial production of the country finds markets abroad. If export growth slows down, industrial growth will also slide. A 10 per cent reduction in export growth will mean a 1 per cent reduction in the industrial growth. The strengthening of the rupee has already caused the unemployment of 200,000 people, as per official figures but about 400,000 people, according to trade and industry. If things don’t improve, this figure will further shoot up. The countries that have gained most from the decline in our exports are China, Pakistan, Bangladesh, Vietnam and Indonesia.

Commerce Minister Kamal Nath has no doubt appreciated the problem created by the over-valued rupee and higher interest rates and initiated measures to alleviate the hardships. The Duty Drawback Rates were revised upwards (by 10-40 per cent) for cotton yarn, fabrics, made-ups, carpets, garments, leather products, handicrafts, engineering products, processed agricultural products, marine products, sports goods and toys. The government also lowered the interest rates on post- and pre-shipment credit by 2 per cent. But these steps by the Ministry of Commerce, commendable as they are, are no alternatives to the softening of the rupee.

The Economic Advisory Council (EAC) preferred restrictions on, the use of ECBs.. The industry is not in favour of restrictions on ECBs as that would lead to higher cost of Indian products. The question to be addressed is: what really is the right rate of exchange? As a rule of thumb, the rupee has to be priced in such a way that exports plus FDIs are equal to imports. But the exchange rate needs to be judged in the context of the impact of the exchange rate on export performance. Considering all the angles, it would appear that the ideal exchange rate should be at Rs 43-44 to the dollar. If this is achieved, it will revive the industrial climate and prevent unemployment.

Economist and Secretary General, FICCI, Amit Mitra suggested:
1) As in the policy being followed by Singapore and which has also been adopted by China. The suggestion is to let our massive foreign exchange reserves be used by the Reserve Bank of India (RBI) “to buy equity in the internationally reputed firms. I don’t think this is likely to affect the value of the rupee. But in case the RBI were to make investments in foreign mutual funds, they could certainly get much higher returns on the money so invested, compared to what they are currently earning, along with the added advantage of appreciation in the value of the investments.

2) Simultaneously; Mitra says that we should raise the cap on Indian companies investing abroad from the current limit of 300 per cent of net worth to 500 per cent of the net worth immediately. This is a good suggestion and should receive early consideration by the Government of India. 

3) Side by side, the intervention of the RBI will have a sobering effect on the international market. It is not the quantum of interventions that will count; the very fact that the RBI is alert and has intervened will change the atmosphere.

These measures would ease the pressure on the rupee.The ad hoc measures taken by the commerce ministry have been warmly welcomed by the trade and industry. But that itself is not adequate. The ER policy as enunciated would help all the industries and should, therefore, be adopted by the RBI and the government of India as early as possible. It would, therefore, be in the interest of exports and the GDP that the present over valuation of the rupee is expeditiously corrected, along with reduction in the interest rates.

It was only seven months ago that Mr. Digambar Kamat took over as the Chief Minister of Goa following the Congress’ victory in the Assembly elections. However, politics in this small state is so fluid that political stability has always remained a distant dream. The resignation of three ministers and the threat of the Nationalist Congress Party to withdraw support have landed the government in a crisis. In two quick decisions, the government first got the Assembly adjourned and then prorogued it on Thursday to prevent voting on the Goa Appropriation Bill 2008 in the House. Clearly, with over nine legislators of the ruling coalition in the 40-member House having decided to vote against the Bill, the government would have fallen.

The crisis also underlines the Chief Minister’s inability to run the government in close cooperation, with his allies, notably the NCP. Mr. Kamat claimed the other day that his decision on the rollback of SEZs had the backing of all the allies. A bigger worry for the Congress is the role of business lobbies in the current crisis. Small states like Goa where a single member can make or mar the government are vulnerable to pressures of all kinds.

Unfortunately, Goa has witnessed 16 governments in 17 years. Despite the Anti-Defection Act, defections have become common. Party labels and affiliations have no meaning when MLAs switch sides all too frequently. They have the least respect for the Constitution which they swear to uphold. Successive governors, including the incumbent, Mr. S. C. Jamir, have abused their powers to bailout the ruling party.

Worse, Speakers too, followed suit, instead of functioning as impartial referees. Very recently, Speaker Pratapsinh Rane restored the voting rights of two Maharashtra Gomantak Party members and a Congress legislator. The decision followed an agreement between the Congress and the MGP under which the MGP MLAs would withdraw their petitions in the Supreme Court challenging the suspension of their voting rights.

The present crisis should be resolved in the best traditions of f democracy - by adhering strictly to the Constitution.

The government’s decision to clear the Rs 1,800 crore scheme- an incentive for the cash-rich private sector to provide employment to 100,000 differently abled people a year - is creditable. According to the proposal, the government will pick up the tab for- the employers’ contribution towards the Employees’ Provident Fund and the Employees’ State Insurance of the special workforce a private sector company employs. However, the landmark decision will lose sheen if we consider the time that has been taken by the government to come to this decision. The first indication of providing an incentive to ensure employment came up in 1995-96. This means that it took the government 12 long years to come up with a concrete plan. And, considering that only one per cent of the total number of differently abled people, who comprise 5-6 per cent of the total population, are employed, this delay is not only unfortunate, it’s almost criminal.

The employment scenario for the differently abled has been dismal for years, to say the least. In 1999, the National Centre for Promotion of Employment for Disabled People did a survey of the top 100 Indian companies and the percentage of differently abled people they had on their payroll. The results were shocking: the total percentage of differently abled people employed in the public sector was 0.5 per cent, 0.2 per cent in the private sector and for multinationals it was 0.05 per cent. The study also proved that in two decades nothing much had moved even in the government sector, considering that the government had made it mandatory to have 3 per cent reservation in jobs for the differently abled in 1977. If a similar study is done today; the numbers would not be much better even though economic opportunities have vastly increased and diversified.

If the government is serious about levelling the playing field, much more needs to be done. For starters, these incentives must have legal backing. Just a ‘directive principle’ to companies will not take us anywhere. A differently abled employee can take a government company to court because a law binds the company. But this is not likely to cut much ice with private employers. More often than not, there is discrimination among differently abled employees: a job would go to a person with a lower degree of disability to avoid overhauling the access infrastructure of the company. By providing employment to people with a lower degree of disability; firms sometimes manage to fulfill their corporate social responsibility without spending a lot on overhauling their infrastructure. Of course, government offices are no better.

Since access is the first step towards integrating the differently abled with the ‘mainstream’, instead of piecemeal action, the government must ask companies to upgrade their infrastructure and this should be backed up by tax-breaks. Or possibly; preferred employers of the new economy - the BPO industry - could be asked to provide low-floor cars for ferrying wheelchair-bound employees, instead of the high-floor SUVs. It would cost the company a little more, but would mean a world of opportunity for a differently abled employee.

Eicher Motors, which has agreed to transfer its trucks division to a joint venture with Sweden’s Volvo, could possibly deploy the funds to create an engineering business, a top official said.

The company will get Rs 400 crore in cash for transferring the truck and component business to the joint venture and is drawing up plans to use the money, Managing Director Siddhartha Lal said over the weekend.

“We do not want to compete against our own unit. It could very possibly be in engineering,” he said. Eicher’s component business currently produces auto parts for commercial vehicles. Other areas in engineering could include components for cars, bikes and industries. It may also be in the area of design and development, though Lal refused to elaborate.

In December, Volvo, the world’s No 2 truck maker, said it planned to invest $350 million to expand in the fifth-largest truck market through a joint venture with Eicher.  Under the deal, Eicher will transfer its truck, component division and 180-strong dealer network to a joint venture with Volvo. The Swedish firm will also move its dealer network to the JV but continue to own its Indian assembly operations.

“Some of our cash is tied-up in bonds. The rest will come when the JV is formed. We are making the plan though, it is early to comment immediately,” Lal said. “For now, the biggest focus is to make the JV a large and significant business.” Eicher lags Tata Motors and Ashok Leyland in sales but expects the joint venture with Volvo to help it get a larger market share as the market shifts from medium trucks to heavy trucks.

“We have the potential to make large investments to make the changes in the market,” Lal said adding the intent was to route all Volvo truck projects in India, through the yet to be named joint venture.

The Volvo truck group includes Volvo, Mack, Renault and Nissan Diesel trucks. A Volvo India spokesman said the JV will certainly distribute all Volvo truck group launches in India but the company was yet to decide the model to adopt for manufacturing in India. Shares of Eicher ended 2.7 per cent up at Rs 382.25 in the Mumbai market.