PM pleads case of small investors

By Our Special Correspondent

MUMBAI, JULY 9. The Prime Minister, Mr. Atal Bihari Vajpayee, today called for spreading equity culture among more and more sections of society and in newer regions of the country.

``Stock markets cannot be a closed club of a small group of participants. There is no reason why stock exchanges should not launch a massive education campaign to attract even wealthy villagers to invest their savings in the equity market, rather than in unproductive assets such as gold,'' Mr. Vajpayee said addressing an august gathering on the occasion of 125th anniversary of the Bombay Stock Exchange (BSE) here.

This is the first time that a Prime Minister is visiting any stock exchange in the country.

``As the BSE grows bigger, it should also carry the small investor with it,'' the Prime Minister said. Small investors were always at a disadvantage because of lack of knowledge and inadequate access to trading opportunities. Said Mr. Vajpayee, ``As we all know, investor confidence was particularly dented by the scandals that broke out in the wake of the first wave of liberalisation in the early 90s. They slowed the process of liberalisation, besides weakening the evolution of a national consensus over economic reforms.''

The Prime Minister urged all the market participants to ensure that the mistakes of the past are not repeated. ``What this sobering experience points to are three basic imperatives,'' Mr. Vajpayee pointed out. They were better investor education, more effective regulation, and the need for all participants in the market to develop a long-term perspective, rather than an instinct for quick, short-term gains. ``Let nobody forget that investment is, primarily, an act of faith. The faith of genuine investors, especially of small investors, must not be allowed to be shaken by unscrupulous operators who often cause artificial volatility in the market. If rigging of elections and cricket matches is bad, rigging of the stockmarkets is equally bad,'' he added.

Need for ethical business

Mr. Vajpayee further reminded that an age-old truth _ namely, that we cannot achieve sustainable prosperity without ethical commerce and ethical business. ``I also urge companies and business associations to discharge their responsibilities well, through good corporate governance, self-regulation, and peer watch.''

Commenting on the recent movement in indices, Mr. Vajpayee said ``I sometimes wonder: Should the sensitive index of our stock exchanges dance mainly to the tune coming from distant bourses? I also think that the capital markets should adopt a more balanced approach towards the so-called New Economy and our traditional economy. Let us not forget that India has built huge strengths in manufacturing, core industries, financial and other services, and also agriculture. We cannot afford to see these strengths grossly undervalued. Well-run companies of the traditional economy, including small businesses in metro areas, should also be able to access enough funds.''

The Prime Minister further said that the capital markets, including the operations of our financial institutions, should be completely free from all kinds of political and bureaucratic interference.

On economy Mr. Vajpayee said, ``we are already one of the fastest growing economies in the world, whose rate of growth is expected to be 7 per cent. This is clearly not enough. We can, and we must, aim at achieving rates of growth that are above 10 per cent on a long-term sustainable basis.''

Faster economic growth requires a far higher level of resource mobilisation as investments into all the productive sectors of the economy. This is where our stock exchanges have a critical role to play. The Prime Minister concluded, ``I see you as the torchbearers of faster economic growth.''

Pension funds

The Union Finance Minister, Mr. Yashwant Shina, said insurance and pension funds would enter the stock markets soon which would give more depth to equity market.

Mr. Sinha said more funds must flow from capital market to the infrastructure sector. Citing the example of Ahmedabad Municipal Corporation which raised public funds to improve its infrastructure, Mr. Sinha said more municipal bodies could come to market to raise the funds necessary for improving infrastructure.

The Finance Minister said that India was recognised as one of the fastest growing economies with the current growth rate of 6.8 and 6.4 per cent during the last two years. If India had to grow at a rate of 8-10 per cent, resources needed to be mobilised to achieve this growth.

Mr. Sinha urged stock exchanges to protect the interest of small investors, who were the backbone of equity markets. ``Unless small investors feel that not only their investments are safe, but interests are also protected, they will not come to equity market,'' he said. According to him mass participation should be there for the growth of the country.

Mr. Sinha added, ``We have moved from few to many. If markets have to grow, we have to move from many to masses.''

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