“Why is there so much gloom?” A client who believed that nothing could go wrong to the Indian stock market a year ago posed this question. A year ago, he was too sure that nothing could go wrong with our markets. Now, he seems very willing to give up his bullish stance. What has changed for the worse in twelve months? Nothing really has worsened. “Oh, the farm crisis is terrible” cribbed my friendly market cynic.”This government has done nothing”. When the World food prices are at a 15 year low, what can governments do? Farming is an industry grown on frugality. When governments throw money to buy produce at artificial prices, farmers threw their frugality out of the window. Wages went up too much. Naturally, viability of crops took a hit. But why are we blaming this government? It wasn’t their making. Price is a function of the market. We need to wait out the painful phase of low farm prices. Government can only help by bringing in technology, lending capital, raising productivity and improving profits. Just what we achieved in BT cotton and Pusa 1121 (a basmati variant) during the last crisis in cotton and basmati. In that sense this agrarian crisis is a godsend. Farmers adopt technology only when they are in crisis. We should push through reforms in agriculture rather than make tokenisms at funerals and before TV cameras. Only more reforms will solve our problems. Indian agriculture is not our economy’s problem. It is a great opportunity waiting to be harvested. On a lighter note, politicians can read a book “Everybody loves a drought” rather than indulge in theatrics. Investors should learn to develop patience, strengthen conviction and keep investing. Resolution is your fellow traveler on the road to wealth.
Just about everything is cyclical – Howard marks.