:: Nitish Sengupta

Diwali dhamaka leaves stock exchange smiling

By Nitish Sengupta

The Wall Street crash seems to have brought the whole world together as never before. Everybody, from the United States to Hong Kong, and from Kenya to Georgia appear to have joined a global crusade against destabilisation, helped by international agencies like the World Bank and the International Monetary Fund. India has also taken the right initiatives to contain this crisis.

Behind every crisis lies an opportunity. The current stock market crisis in India - spelling doom for speculators, rather than investors - is one such opportunity. It was the near wholesale capture of the Indian stock market by foreign institutional investors (FII) which started the bullish phase in the Indian stock market during the 1990s. That phase ended about two weeks ago with the Wall Street financial tsunami. All FIIs started selling their shares in Indian companies to shore up their own finances back home. The total outflow from the sale of shares by FIIs this year amounts to more than $12.1 billion. In a matter of days, the Bombay Stock Exchange Sensex fell from over 20,000 to 8,509.6 points. Similarly, the Nifty Index on the National Stock Exchange fell by 59.80 per cent, to 2524.20 points.

It is difficult to say whether this steep fall is entirely due to the behaviour of foreign shareholders or is a result of sympathy with the Wall Street crash. Or, to some degree, is a result of the crisis in India's own economy. Perhaps, all these reasons are responsible to some extent. The bear operators must also own up to a certain degree of responsibility. But the end result is that a large number of "sought after" shares are now available at affordable prices. This is, indeed, a lifetime opportunity for investors with surplus cash. They should pick up shares of good companies and hold on to them until the FIIs return in about two years' time, pushing up the share index once again. Meanwhile they will enjoy good dividend income.

Luckily, this Diwali heralded a turning around of the Sensex, preceded by the turn around in nearly all Asiatic stock exchanges. Even Wall Street quotations seem to have responded to the Diwali dhamaka. The recovery in the Sensex and the Nifty has to be taken in conjunction with the falling rate of inflation and the falling crude prices. With the crude price descending to $68 a barrel, Indian government should seriously explore the possibility of deregulating petroleum prices once again. It will be beneficial to the economy.

ONE GETS somewhat bewildered at a recent news report that the Union ministry of human resource development is considering a recommendation of a committee to set up a 15-member pan-IIM board, as a mega supervisory body for all the IIMs, and corresponding reconstitution of the existing boards by a committee headed by the HRD ministry's secretary. Does it mean that henceforward IIMs will no longer be independent institutions, a time-honoured tradition since the early 1960s when the IIMs were set up?

If the notion of academic independence was sacrosanct then, it is all the more so half-a-century later. If there is one factor to which we can attribute the IIMs' world-acclaimed academic excellence, it is their academic independence. It is this that has put our IIMs and IITs on the world map. But this does not seem to be to the liking of a section of politicians who want these institutions under their firm control.

There has always been a certain degree of control over the IIMs: The HRD ministry's approval is necessary before constituting an IIM's managing committee, including its chairman. The director of the institution is appointed with the approval of the Cabinet's appointments committee. Also, the HRD ministry has to approve an IIM's budget, which includes hefty Central government grants. But thereafter there is no control over syllabus, research, appointment of teachers, the common admission test (CAT), or the institute's examination system.

Initially there were four IIMs (Calcutta, Ahmedabad, Bangalore and Lucknow) and they established a world-class reputation among industry and the academia. Thereafter, three more IIMs were established at Indore, Khozikode and Guwahati, and one more is underway in Shillong. Attempts during the 1990s by the All-India Council of Technical Education (AICTE) to establish control over IIMs failed. Then came the recent attempt to impose OBC reservation on the IIMs. But the IIMs chose to fall in line, and the expected clash was averted. It is not at all clear what the government seeks to achieve by setting up a pan-IIM board. This idea should be abandoned and the IIMs should be allowed to function with autonomy.

NARESH GOYAL'S Jet Airways, after years of success and many "firsts" to its credit, did not exactly cover itself with glory when one fine morning Mr Goyal dismissed 1,900 of his staff and the very next day took them back because he was moved by their tears. Several questions arise: First, the company seemed to have been going merrily from one new route to another, including international routes, and had become the airline with the largest volume of traffic in the domestic sector. Did it not occur to Jet's top management that at some point of time they have to consolidate all their resources? Secondly, taking advantage of the lack of proper regulation in the civil aviation sector, some airlines started flying international routes. Both Jet Airlines and Kingfisher started flights to the US. But they did not take into account the fact that America's civil aviation was in recession. And finally, they did not take note of the rising oil prices. Had all this been done, companies like Jet Airways would have talked of consolidation and contraction of fares and services long ago.

Normally, when a company takes a drastic step like retrenching 1,900 employees, one assumes that it has done its homework to justify this and that it also tried to avoid it by cutting costs in other areas. Apparently, Jet Airways did not do any such thing. Even when Jet Airways and Kingfisher announced entering into some kind of a cartel a few days before this, they had not thought of such a drastic step. It is good that Jet decided to withdraw its dismissal order and instead introduce reduced remuneration for surplus staff. Whether this was prompted by Mr Goyal's compassion or it was a reaction to Shiv Sena's threat of violence, is difficult to say.

Dr Nitish Sengupta, an academic and an author, is a former Member of Parliament and a former secretary to the Government of India