What state govts can learn from de Soto and a market fundamentalist

If capitalism has to work in developing economies, including India, it has to become more inclusive, it has to understand and deliver property rights to more people. That’s what Peruvian economist Hernando de Soto, adviser to 40 governments, told me last week as we discussed the future of capitalism in India. For this, he said, governments need to first study the laws that govern property rights and then change them so as to reflect their country-specific realities. The conversion of squatter rights to legal ones, for instance.

Opinion in The Indian Express, October 29, 2007

‘Whether you are democrat or dictator, on the left or right, exclusion will sooner or later destabilise you’

The Left hates your ideas, the Right wants to smother them. You must be doing something good.

There are many people in my organisation who have Left leanings and many are with the Right. You are probably referring to the assassination attempts on me. Those were specific. They had to do with the fact that I wrote a book The Other Path. The Peruvian Marxist Terror group Shining Path had intellectual pretensions. The advantage for them in the country was that there was no challenge to them from the right or the centre. After the book there were a variety of organisations, which originally were trade unions, that created the ripple effect.

Interview in The Indian Express, October 27, 2007

Sebi may allow FIIs to register for good

Once the noise around participatory notes (PNs) gets over, Securities and Exchange Board of India (Sebi) will make another feel-good announcement: registration of foreign institutional investors (FIIs) with the regulator will be for good — they won’t have to renew it. According to a senior Sebi official, “Registration of FIIs will be till perpetuity, unless, of course, we have a reason to revisit them.” As of now, FIIs can be registered for three years, after which they have to renew the registration.

Opinion in The Indian Express, October 25, 2007

Many opportunities in the big discount sale, but is anyone buying?

The 1,499 point, 7.9 per cent fall in the Sensex last week hid the even greater 1,744 point, 9.2 per cent intra-day fall on Volatile Wednesday. The Wednesday fall followed Securities and Exchange Board of India’s proposed restrictions on participatory notes, a vehicle global moneybags not wanting to go through the process of registering themselves as foreign institutional investors (FIIs) use to get an India exposure. The week has seen enough critique, debate and discussion on how good or bad it is for such investors to enter through the “front door”.

Opinion in The Indian Express, October 22, 2007

You need not fear market volatility... the India story continues to be as stable as ever

I have always maintained that in the short term, stock markets are irrational. But yesterday’s 1,744 point, 9 per cent fall foxed even the most hardened among us. That the fall would come was expected, my rounded range was between 600 and 900 points. When the fall is double to triple of one’s estimate, it’s time to bow your head before the Lord of Volatility — the market itself — and exit as gracefully as you can. Just as I was doing that, the market changed direction and finally closed a statistically insignificant 336 points lower. Phew, what a day!

Opinion in The Indian Express, October 18, 2007

Prize for guessing

From Robert C. Merton’s and Myron S. Scholes’ methods to determining the value of derivatives 10 years ago, through Amartya Sen’s welfare economics in 1998 and Daniel Kahneman’s integrated insights from psychological research into economic science in 2002, it seems the Nobel Prize for Economics has gone back six years to 2001, when three economists George A. Akerlof, A. Michael Spence and Joseph E. Stiglitz got the award “for their analyses of markets with asymmetric information”.
Technically called ‘The Sveriges Riksbank Prize in Economic Sciences’, the troika that has won this year’s prize — Leonid Hurwicz of the University of Minnesota (and at 90 the oldest to get a Nobel); Eric S. Maskin, 57, of Institute for Advanced Study, Princeton; and Roger B. Myerson, 56, of University of Chicago — has got it for “having laid the foundations of mechanism design theory”. In English, for marrying asymmetric information with institutional design.

Opinion in The Indian Express, October 16, 2007

Why SEBI’s investment adviser regulation is great, but only the first step

I didn’t meet any Sakett there. I didn’t hear the state’s anthem, John Denver’s inspiring Rocky Mountain High on any radio station either. But hiking in the Colorado mountains, some three hours off the Mile High city of Denver, I could get a sense of Louis L’Amour’s outlaws, marshals, cattle drivers, drifters, no-accounts...all of who have been driven out by business tourists like myself and mansions of the wealthy. Still, the beauty of creeks, ridges and the sheer expanse of the Rockies takes your breath away.
But that was only a diversion. I was in Denver on a regulatory pilgrimage, to meet players and organisations that have made the city the financial planning capital of the world and its 53 square mile international airport, the country’s largest. The College of Financial Planning created the CFP certification in 1972; it was announcing its 100,000th graduate as I walked into its Greenwood Village building last month. In July 1985, the College later handed the CFP brand to Certified Financial Planner Board of Standards or CFP Board, which acts as an SRO (self-regulatory organisation), by creating and enforcing professional standards through education, examination, experience and ethics. Constitutionally, the CFP Board is not allowed to lobby, so I also met the Financial Planning Association.

Opinion in The Indian Express, October 14, 2007

India through Sensex

Nine months ago, it was a cautious market reacting to a Sensex 14,000 on January 3, 2007. But despite the caution the market expressed then (experts said don’t expect it to rise more than 15 per cent during the year), the Sensex has already risen 30 per cent. The same experts are now touting the 20,000 mark as touchable. I believe they need to be more confident about their forecasts than flitting around with volatility. The market has been mercilessly optimistic, reflecting the underlying companies that are ruthlessly cheerful. Moving towards a climax that’s still many years ahead.

Opinion in The Indian Express, October 11, 2007