Foreign institutional investors now apparently control 75% of India’s free-floating stocks valued at some $250 billion. A threat to sell even a tiny fraction of these holdings could send the stock market and the currency crashing. If the nexus between foreign capital and big business is questioned by a new political order after the elections? How should the nation respond if the currency falls steeply due to a sudden decline of capital inflows, as happened in Thailand or Indonesia during the Asian financial crisis? Is the political class prepared to protect domestic interests and jettison the fair-weather friends from global finance, and their well-healed compatriots (comprador?) among the domestic capitalists? There is an urgent need to mobilise public and intellectual opinion against bowing to the pressures of international capital. This requires a concerted effort to gradually reduce the dependence on short-term inflows to finance the CAD and take calibrated moves to delink the external financial markets from the domestic economy so as to insulate the real sector. In the medium to long term, this calls for a national strategy to reduce import dependence by expanding domestic production by offering suitable incentives and restricting luxury consumption (which by all accounts have grown phenomenally). All of this calls for political statesmanship and intellectual imagination to safeguard economic sovereignty and securing the economic future of 1.2 billion Indians.
Posted on: Wed, 19 Mar 2014 06:25:52 +0000
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