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GAIL divestment in local market, says Sinha

Syed Firdaus Ashraf in Bombay

Finance Minister Yashwant Sinha took some time off from the ongoing Parliament session to take stock of the capital market scenario. He was in Bombay on Saturday to release the report of the task force on capital markets constituted by the Federation of Indian Chambers of Commerce and Industry.

"We are unable to create confidence in the small investors and many of the investors are ruined. That is why they are reluctant to invest in the stock market," he observed while addressing the gathering.

Sinha went on to redefine the role of the stock markets. ''The market has an important role -- it mobilises resources for the industry. Also, it is the mirror of business sentiment in the country. It gives us timely warning on things which are not doing well in the economy and gives us an indication to take timely action."

He said the BJP-led government has embarked on second-generation reforms including public-sector and insurance reforms, which are harder and painful and aimed at setting the economy on the rails.

Sinha recalled an incident to underline the depths that the bourses have been plumbing of late. "I remember when I was travelling by a train in 1992, I met a television salesman. He told me in spite of the marriage season television sets are not selling because the fathers are giving their daughters scrips of shares rather than the television sets. And you see today, we cannot imagine such things as the market will never touch 5000 to 5200 points," the minister recalled.

He pointed out that small investors today are investing in small savings and post-office savings. The corporate sector and the government must find a way to divert their funds to the stock market, he said.

Sinha said the market would never be propped up through fiscal incentives and investments by provident funds and insurance companies. The common investing public has to gain confidence in the system and its participants. Only then will things improve, he said.

The minister attributed investor despondency to the fact that they were taken for a ride by unscrupulous brokers and traders. "We have to keep an eye on fly-by-night operators. We need to regulate the market carefully and must never allow such things to happen. If during these eight years the government had to learn (several lessons), the corporate sector too needs to learn a lot. Both of us have not been able to adjust to the forces of market. That is why Sensex at 5000 to 5,200 points remains a dream."

Sinha said the disinvestment target of Rs 50 billion will be met and added that the disinvestment process will be carried out in a phased manner.

He said the Centre will soon implement its second disinvestment programme involving the state-owned Gas Authority of India Limited. The entire disinvestment will be made in the domestic market.

"This move will provide a depth and a wide spread to the stock market. When the Container Corporation of India was disinvested, we went into the Indian market and not the Global Depository Receipt market because we wanted to revive the stock market. We are disinvesting the Gas Authority of India Limited in the local market in order to revive the market."

He sought to delink the fiscal deficit and the Budget. ''It is no more a budgetary feature to make up the government fiscal deficit. Like in the past, the government would not wait for the market to revive and then go for disinvestment. We are moving progressively to a different concept through disinvestment process as the government does not want to penalise the entire population to bridge the deficit caused largely by a section of loss-making unviable PSUs,'' he declared.

On the fiscal deficit, he said, "In the first five years of 1980-81, the fiscal deficit was at an average of 6.1 per cent of the GDP. In the second half of the decade it went up to 8.2 per cent of the GDP. In the year 1991, it was 8.2 per cent of the GDP. And then it was at an average 6.2 per cent of the GDP. I hope to contain it at 6 per cent."

Speaking on the occasion, Unit Trust of India chairman P Subramanyam said PSUs and leading private sector companies should come to the market with reasonably priced issues so as to attract primary investors.

While there is an urgent need of greater coordination among the regulators, he said the policy framework should focus on bringing the international practices on a holistic basis.

Subramanyam also insisted that the stamp duty which widely differs between the states, should be reduced and made uniform across the states.

''The quest for a fundamentally strong and liquid capital market lies in good governance, a system which assures immediate redressal of complaints and bookings of faults,'' he added.

Former State Bank of India chairman Maya Shankar Verma said the performance of the capital market generally reflects four basic factors: micro-economic fundamentals, structure, technology and system.

''At micro-economic level, we are having high risk-free return in the economy such as bank and post-office deposits which curtail the flow of funds into the market. Further, the Indian corporate sector takes heavy burden of cross-subsidisation of the economy and as a result, their revenue generation becomes weak and equity becomes costlier,'' he said.

Verma said the capital market is suffering from lack of dependable distribution channel and transparent mechanism for discovery of issue price.

Addtional reportage: UNI

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