Rohit Joshi/Zee Research Group
New Delhi: The lawyer turned politician P Chidambaram just loves to play the market and as always his North Block stint has given Sensex an unusual high. For the record his latest innings that began on July 31, 2012 has evidenced Sensex put up its best performance this year breaching the 19,000 mark on Thursday.
The Sensex since his return as FM has witnessed a rally of nearly 1914 points. Of the 23 percent gain for Sensex so far this calendar, nearly half (11.2 percent) came during his about 60-day stint at the finance ministry. The Sensex closed at the highest level (19058) of 2012 on Thursday, October 4.
Sensex rally has been essentially driven by the slew of reforms unleashed by the government post moving of Chidambaram to the finance ministry. The structural reforms started with the diesel price hike, capping the limit of subsidised LPG cylinders, allowing FDI in multi brand retail and aviation.
Within the next 20 days, in another round of big-ticket reforms, Cabinet cleared proposal related to 49 percent FDI in insurance along with 26 percent in the pension funds. It also cleared the revised draft of the Companies Bill apart from upgrading five airports to international level.
The rash of reforms have redeemed the government’s credibility and sent out a message that India means business. That the Prime Minister Dr. Manmohan Singh shied away from initiating these reforms during his tenure as FM post the exit of Pranab Mukherjee showed his faith in Chidambaram, as a key pro reforms minister at his command.
On cue, Chidambaram has stated that to boost the economy, more measures will be taken by the government. The measures taken and those to be unveiled going forward are likely to have far reaching implications on all aspects of economy.
In fact, his actions have started bearing fruits as rupee has appreciated by nearly 6.5 percent since 13th September which would help in narrowing the current account deficit. In the current fiscal (2012-13), Foreign Institutional investors (FIIs) have purchased equity worth Rs. 20,808 crore in the month of September. It is September when record net inflows have been registered in a single month during the period under review.
Furthermore, September has also seen the second highest FIIs buying in this calendar year after February when the quantum of buying was more powerful (Rs. 23,236). This indicates that the investor confidence has somewhat restored which was a key challenge before Chidambaram at the time of joining as FM.
However, it is not the first time when Sensex achieved the highest level of the year after Chidambaram took over as FM. In his second stint as FM from 2004-08, the Indian economy expanded at an average rate of 9 percent in the three years before the global financial crisis deteriorated the mood of economy. It was during his tenure only when Sensex has crossed 21, 000 mark in January 2008.
He managed a massive agricultural loan waiver programme, and rolled out the rural employment guarantee scheme (MGNREGA). A significant portion of Goods and Service Tax (GST) work was done during the period. Along with this, the entire Direct Tax Code (DTC) Bill was drafted before he shifted to home ministry.
Similarly, Chidambaram began his first stint as finance minister in June 1996 as part of the government headed by H D Deve Gowda. Within 18 days of his joining, Sensex soared and closed at the highest level (4069) of the year 1996. During his tenure (June 1996 - March 1998), he has also presented the so called ‘Dream Budget’ for the year 1997-98 on February 28, 1997.
Sensex gained 224 points on the budget day and also added 206 points on the following day.
He slashed income tax rates, the three rates which he introduced then were- 10, 20, and 30 percent- are yet in operation yet. He launched the Voluntary Disclosure of Income Scheme (VDIS) that garnered about Rs. 10,000 crore, liberalized FII investment limits, and opened up insurance.
The Harvard-educated Chidambaram is known to take the bull by horns. For an instance, in July 1991 he reportedly rewrote India’s foreign trade policy at one go during a non-stop eight hour session in Udyog Bhavan when he held independent charge of the commerce ministry under the leadership of P V Narasimha Rao.
Most importantly, like the first time he was part of the reforms package in 1991, this time too he has managed to enjoy unequivocal trust and confidence of his boss (read bosses).