Confidence itself is only a trick!

Confidence itself is only a trick!


Influential, if somewhat oracular newspaper editor Shekhar Gupta, recently quoted the late General Sundarji , about what keeps a soldier going in an assault. One group turns tail because their lead man does. Another, alongside, charges forward to avenge the dauntless courage and sudden sacrifice of their front-man. Both groups are trying to take the same difficult hill but the behavior of the first soldier is crucial. Panic is contagious. So is courage. And who dares, wins.

Mr.Gupta used the military metaphor to suggest India has no reason to import a panic not of its own making. He likened the Indian financial crisis to a deficit of jawanly courage, brought on by fickle, mistaken, and damaged sentiment.

I think Mr. Gupta has a solid point. As we watch the global financial crisis unfold, it is remarkable how the bullish voices in India have all but died out. Any that persist are muted, embarrassed, and preface their remarks with caveats and conclude them with codicils.

The prevailing, if turn-coat wisdom, is that all is lost. It is turn-coat because the same people will be singing hosannas of optimism once we climb another 5,000 points on the Sensex. But, right now, they say we are headed towards a certain abyss, a pit, with the pendulum swinging ever closer, hurtling towards point zero and certain destruction. That we are dug into a hole so deep that it will take us years to emerge.

This is ridiculous. Where is the perspective in all this? Why are we treated to jatra-strength breast-beating that refuses to look at reprieve despite a slowing but still growing economy? The utter lack of balance does not worry these pundits, or the editors of the financial papers and TV channels who let them prattle on. It must be difficult, I will admit, to find anybody willing to emit a ray of sunshine amongst all the dark clouds though.

It reminds me of a recent Newsweek cover story on “Temperament”. In it, Nancy Gibbs writes, “Temperament is a special subcommittee of character: it is less intellect than instinct, more about music than lyrics.” So the music our “experts” on the stock market hear at present must be a discordant and hellish cacophony without end.

It seems possible, if you’re anything of a sociologist, that the Indian economic and stock market analyst suffers, along with most of his countrymen, from a deep seated inferiority complex. He does not really believe the much-touted “India story” and goes along with it as long as the foreign investor appears to do so.

He is just the product and result of being a poor little post-colonial player, the babufied “Macaulay’s Child”, burdened by undigested learning, destroyed by adversity: in short Rudyard Kipling’s “hot-house plant”, a “native” unable to run his own affairs, and willing to destroy 65 per cent of his net worth on someone else’s say so.

He cannot see, like Warren Buffett, the proven long-term player, the honest-to-goodness “Oracle of Omaha”, that the US is currently experiencing a “fire sale” and that it is time to “buy”. This, in a country where there really are serious financial failures being dealt with. Mr. Buffett knows there may be momentum left in the so-called “falling knife”, but he also recognises a good deal here and now, with US stocks indiscriminately down some 40 per cent, and is not bothered about timing the absolute “bottom”.

Our market men too, those who vote with their money instead of their opinions, must share the blame for this disgraceful chaos of capitulation. They have allowed the owners of 10% of market share, in the form of the FIIs and other foreign investors such as the currently hard pressed Hedge Funds, to control the market, lock, stock, and barrel.

Their problems have been adopted as the problems of the other 90%. This means not the usually skittish and shallow-bottomed retail investor but also our domestic institutional players, our insurance sector investors, the mutual funds and the high-net worth players. The foreign investor’s views are, alas, also our views. Their approval makes for our self-esteem. When they say things are not so good, we think likewise, and do likewise, like lemmings. When they buy we buy. When they sell, we sell too and/or stand aside and let the market crash from depth to depth. It is pathetic but true.

And so, the funereal air refuses to lift, with each learned and expert commentator trying to out do the other with the force of his pessimism. And unfortunately, we have no rallying point from the real economy either, unless you count Mr. Chidambaram’s patronising and slow motion remarks for the mentally retarded.

AA Gill from The Sunday Times in England made the interesting point that there seem to be no proper orators left amongst the British politicians, capable of lifting people’s spirits during the crisis that is shrinking Britain to a real, and not imagined, recession, as in India.

The present ones in charge of the UK, such as British Prime Minister Gordon Brown and Chancellor of the Exchequer Alistair Darling, stand around wringing their Leftist hands and making everyone feel decidedly worse. Gill has a point too.

There is certainly no Winston Churchill intoning courage into British ears, his sonorous voice and inspiring words refusing to be drowned out by the whistle, crash and burn of Nazi bombs.

But if we in India insist on being led by the nose, let us take heart from the facts as they unfold in the US. The US National Debt presently is at 38 per cent of their GDP, well below its 1990’s peak of 49 per cent, even if a lot of it is borrowed from China. All the bail-outs in America, even if they inflate to USD 1 trillion, will account for just 7 per cent of their GDP this fiscal, the highest level since 1986, not 1929!

The American economy will certainly revive, sooner, rather than later, in a year, or two, tops, and Mr. Buffett recognises this. Europe, Japan and the rest will follow suit, because they are, in effect, like branch offices of the US.

India will average 6.3 per cent growth in GDP per annum going forward to 2030. So when do we stop whining and start counting our blessings?

(1,051 words)

Friday 31st October 2008
Gautam Mukherjee