BOOK REVIEW

Architect of stock market reforms

TWO SCORE AND TEN — My Experiences in Government: G. V. Ramakrishna; Academic Foundation, 4772/23, Bharat Ram Road (23, Ansari Road), Darya Ganj, New Delhi-110002. Rs. 595.

SITTING IN front of the TV watching the moving ticker announcing the changing price of every share in real time — along with objective expert reviews for the benefit of the small investors — one is apt to forget that the stone age of the Indian stock markets (which, according to the author, "consisted of the brokers and were run by the brokers for the benefit of the brokers") had persisted till as recently as just a decade ago.

The person who had initiated the reform of the stock market and put in place the regulatory mechanism against virulent opposition by the vested interests — and in spite of lukewarm support by the government — was G. V. Ramakrishna, a retired IAS officer, the first regular Chairman of the Securities and Exchange Board of India (SEBI).

In this book, Ramakrishna gives a graphic account of the ills besetting the functioning of the conventional stock markets (in which, often, the regulators were themselves the rule-breakers) and the step-by-step regulatory process initiated by the SEBI that resulted in breaking their stranglehold and protecting the genuine investors' interests.

The reforms relating to the primary market resulted in greater disclosure of relevant information in the prospectus and throwing additional responsibility on the merchant bankers. The "stock-invest" was an innovation that curbed the proclivity of the promoters to have a free run of the unsuccessful applicants' money without interest-liability for unconscionable periods.

Significant among the SEBI's long-sustaining reforms of the secondary market under the author's chairmanship were the setting-up of National Stock Exchange with a professional Board of directors, allowing foreign financial institutions to invest in Indian stocks, and the prescription and enforcement of disclosure norms for mutual funds. It is not that stock-market-related financial scams cannot occur under the new dispensation, but the regimen initiated by Ramakrishna and improved upon by his successors using modern information technology can warn alert regulatory staff to sniff the presence of a dead rat before putrefaction sets in.

The author's career in administration was unique since it extended to nearly 50 years as against the normal 35 year-span of a career bureaucrat. (Hence the title of the book.) This was because, after his formal retirement four different Prime Ministers — Rajiv Gandhi, V. P. Singh, P. V. Narasimha Rao and Deva Gowda — called upon him to take up assignments, which involved breaking new grounds.

Perish the thought that the author was perhaps one of those "yes-men" currying favour with the top-bosses to get plum posts after superannuation. He had, in fact, earlier invited Rajiv Gandhi's wrath by scuttling all attempts of the Prime Minister's Office to award the Rs. 680 crore welding work in the 1700 km Hajipur-Bijapur-Jagdishpur (HBJ) gas pipeline to Snam Progetti of Italy, represented in India by Quattrochi. Rajiv Gandhi later offered him a three-year post-retirement tenure as Ambassador to European Economic Commission in Brussels.

The author records an interesting sequel to the unsuccessful attempts of Quattrochi to get the contract awarded to the Italian firm. A senior representative of the eventual winner of the contract, Spie Capag of France called on Ramakrishna and offered him a reward of — hold your breath! — Rs. 34 crores (five per cent of the contract value) for having processed the case in a clean manner without even a cup of coffee taken from them, gratuitously adding that it could be taken either in India or abroad.

Ramakrishna transferred the "reward" to the government itself by forcing the firm to reduce its bid by Rs. 34 crores on the threat that, otherwise, they could forget about the contract and go home. His later elevation as Member of the Planning Commission was the sequel to his treading, as the SEBI Chairman, on the toes of former Prime Minister Narasimha Rao's son.

A full chapter on his tenure as Chairman of the Disinvestment Commission (DC), appointed by Deva Gowda, has an in-depth discussion of the various issues relating to disinvestment of public sector units (PSUs), such as the criteria for classifying them as strategic and non-strategic, restructuring them before disinvestment and segregating the proceeds of the sales of the PSUs from the general revenues and earmarking them for social infrastructure schemes. In the event, political compulsions rendered the three-year efforts of the DC — resulting in 12 reports on 58 companies — practically infructuous.

The author has included his well-argued thoughts on various topics such as the development of the Indian construction industry to global standards, elimination of corruption at various levels in government, the importance of cattle to the national economy and the role of civil servants in a deregulated economy.

Ramakrishna offers a solution to the problem of a hung Lok Sabha through the simple expedient of having different criteria for recognition of state and national parties, and reserving symbols for state parties only for election to the State Assembly and not to the Lok Sabha. This is an altogether illuminating book that throws light on the issues and problems relating to the early stages of economic reform by an honest, brilliant and committed participant in the process.

K. S. RAMAKRISHNAN

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