Parliamentary panel must go into the Sensex crash
Inflation rising, may worsen Farm growth stagnant Food security endangered by falling buffer stocks Minister has no business to advise investors
NEW DELHI: The Bharatiya Janata Party has demanded a special mid-term economic review by June-end, as various indicators are worrisome, and a "study" by a joint parliamentary committee of the 3,316-point crash on the Sensex in just 21 days.
Inflation has been rising and is expected to get worse with the recent increase in the prices of petrol and diesel, interest rates are climbing, growth in agriculture is almost stagnant, current account deficits are growing, and food security has been endangered by falling buffer stocks, the party said on Friday.
At the same time, small investors lost a huge amount on the stock market Rs. 10,000-crore market capitalisation was wiped out in just three weeks.
Party spokesman Prakash Javadekar said here that the Reserve Bank of India increasing the Repo rate by 0.25 per cent "was a clear admission that the threat of rising inflation was real." Raising the Repo and reverse Repo rates was bound to affect all kinds of credit loans for homes or cars, farm loans and money borrowed by industry to expand production or set up new ventures would become costlier.
All this would nullify the high growth claimed by the United Progressive Alliance, he said. The economic scenario would hit the poorest harder, reducing purchasing power further.
Mr. Javadekar said the Government had admitted that foodgrains procurement was low, and hence the need to import wheat. He alleged that there was a government proposal to cut allocation of subsidised grain through the public distribution system, while increasing the price of rationed foodgrains.
The BJP also demanded the drawing up of a road map of measures the Government proposed to take to tackle the situation.
Kirit Somaiya, BJP convener of the investor cell, wanted to know whether the market was manipulated and a crisis manufactured, leading to a rapid fall on the Sensex, the like of which had not been witnessed since the Harshad Mehta scandal, which broke out during the Narasimha Rao regime.
He was critical of Finance Minister P. Chidambaram "advising" investors to keep putting money into the market even when it was down. It was not the business of a Finance Minister to advise investors, said Mr. Somaiya.
There were 1.25 crore small investors in the capital market and 75 lakh people who had invested through mutual funds. Over 20 per cent of market capitalisation was wiped out in 21 days, he emphasised to build his case for the joint parliamentary committee "study."