Recently an incident in India caught my attention and made me think about how proactive the Indian government is towards protecting, as well as fostering, its economic interests while the leaders and the government of Nepal don’t really give a damn about the economy.
On Friday, April 9, the Securities and Exchange Board of India (SEBI) decided to ban 14 Indian insurance companies from selling a particular product called Unit Linked Insurance Product (ULIP). Next day, reacting negatively to the SEBI’s move, Insurance Regulatory and Development Authority (IRDA) of India asked the 14 insurance companies to ignore SEBI’s ban and do business as usual. The tussle between the India’s two regulatory authorities created a sort of panic among market participants during the weekend as the insurance companies are one the major institutional buyers in the Indian equity market. Indian business news channels and online news portals were carrying out discussions as to what would happen next when the markets would open following Monday.
The root cause of the dispute was that since part of the money in the ULIP plan is invested in equity market, SEBI, as a regulator of the securities market, wanted these kinds of equity linked product to come under its own purview. However, IRDA, as a regulator of insurance companies would have none of it as it felt that SEBI was trying to enter into its jurisdiction. In fact, releasing a circular last Saturday, the IRDA chairman assured the policy holders of the 14 insurance companies that the ULIP’s are “safe and secured.” The war of words between these two regulators was played out openly in media over the course of the weekend.
Fearing that the prolonged tussle between two powerful regulators could send a wrong message to market participants and dampen investor’s confidence, the Indian Ministry of Finance called on IRDA and SEBI’s chief on Monday, 12th of April, for a meeting and status quo was restored and market breathed a sigh of relief.
Though, according to recent developments, the matter is in the process of moving to the High Court of India as to who should actually regulate the ULIP, this incident shows how serious the Indian government is towards its economic priorities. If the Indian Ministry of Finance had not initiated the meeting and if status quo wasn’t restored, war of words between the two regulators as to who should regulate the product would have continued sending wrong signals to investors and market participants in general. Moreover, it would have also sent a wrong to foreign investors who are now major buyers in Indian equity market. By reacting swiftly, the concerned officials were able to reduce uncertainty in the market.
Though corruption in India is still rampant and ministers are still involved in shady deals as evident from the recent Indian Premiere League (IPL) fiasco, the Indian establishment has however understood that it should get its basic economic priorities right to further strengthen its economic progress. By giving top priority, the progress that India has made towards development of infrastructure and capital market in recent years is remarkable.
This is one of many examples which demonstrate that Indian bureaucracy and Indian government have indeed come a long way. Long gone are the days of license Raj when things would happen in snail’s place. Indian government now realises that in order to push its economic growth towards the next level, it needs to be proactive in every sense. In order to realise its place as one of the top two economy in the world by 2050, India is changing — and how!
I believe bureaucrats and policymakers in Nepal can take a big lesson from an incident like this.
This article was first published in The Kathmandu Post on April 25 2010
Link: http://www.ekantipur.com/the-kathmandu-post/2010/04/24/Oped/Get-your-priorities-right/207576/
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