PC should move on to a wider canvas

Finance minister P. Chidambaram’s 10 commandments are refreshingly positive when compared to the thou-shall-not diktat given by God to Moses on two stone tablets. But the dissimilarity ends there. The similarity is that both Moses and Mr Chidambaram say the obvious. Having put his finger on some of the problems that have to be tackled, Mr Chidambaram needs to go further as he seeks to rectify the alleged economic profligacy that the country witnessed between 2009-2011. This profligacy under the watch of Prime Minister Manmohan Singh and then finance minister, now President Pranab Mukherjee was fuelled by cheap money and enormous liquidity flowing from the US. The government was like the grasshopper that sang all summer and starved in the winter as it had not stored grains. The 10 commandments apart, Mr Chidambaram needs to move on to a much wider canvas than he operates on presently. The country needs reforms in the real sector, where goods and services are produced through the combined utilisation of raw materials and other production factors such as labour, land and capital, while providing large-scale employment. Mr Chidambaran will have to go to the people who are the backbone of the real sector, namely the genuine small and medium industry associations and the young entrepreneurs with fire in their bellies. This will pay more dividends than playing handmaiden to the elite chambers of commerce that he usually turns to for cues on what the economy needs. The financial sector which has seen a lot of reforms needs further serious reforms and Tuesday’s bloodbath on the stock exchanges is a reminder of this. The Food Security Bill is being blamed for the carnage, but nothing could be further from the truth. The reality is that before the last Thursday of the month, when it’s settlement time in the derivatives segment, there are always tremors as this segment is a virtual casino. There has been a demand for introducing physical settlement instead of the present cash settlement. But a strong lobby has effectively scuttled attempts by working successive Sebi chairmen to introduce it. Similarly, unless the government wants the rupee at 70 to the dollar and more, it should impose stiff margins on currency derivatives trading. Perhaps Mr Chidambaram could look into these two aspects whilst trying to resuscitate the economy.