For the first time since 1991, India's misery index has remained persistently at elevated levels. Policymakers will have to make tough decisions, says Nomura
It should come as no surprise that economic misery is rising in India. In the current stagflation-type scenario of high consumer price index (CPI) inflation and negative industrial output growth, the misery index (difference between CPI inflation and industrial production) of India is at an elevated level.
According to Nomura Financial Advisory and Securities (India) Pvt Ltd, such economic conditions hurt the poorer segments of society much more than the wealthy. "It also means a very tough economic environment for policymakers. Taming inflation or the currency (as is the case currently) may require policies that result in increasing the economic misery for people in the near term. Unfortunately, we see no short cuts," it said in a research note.
Nomura said, over the past two decades, there have been a few episodes when the misery index was higher than it is currently, but most of these episodes were short-lived. This is the first time since 1991 that the index has remained persistently at these levels, it added.
SEBI has been clamping down on entities that have illegally raised money from the public. On a preliminary examination, the market regulator found that the issue was related to private placement of securities by Kolkata Weir
Market regulator Securities and Exchange Board of India (SEBI) has Kolkata Weir Industries (KWIL), its promoters and directors from raising money by issuing securities.
SEBI, citing the Sahara case and the Supreme Court's order in this regard, said Rs47.9 crore raised by Kolkata Weir from over one lakh investors amounted to a public offer and not a private placement.
"... KWIL is prima facie engaged in fund mobilising activity from the public, through the 'offer of redeemable preference shares,' which is a public issue made to 50 persons or more," the market regulator said in an order on 14th August.
SEBI has directed KWIL and its directors and promoters "not to collect any more money from investors through issuance of securities in any manner." This includes, Sahajahan Khan, Samsul Alam Khan, Ram Krishna Mondal, Prabir Haldar, Ratan Kumar, Ajay Kumar Srivastab, Selim Laskar, Lukaman Ansari, Chandan Chowdhury, Sahajamal Khan and Lakshmi Kanta Gayen.
The company has been barred from disposing of any of its properties without prior permission from SEBI. It also cannot divert any funds raised from the public, which are kept in bank account(s) and/or in the custody of KWIL, the order said.
SEBI noted that although the 'offer of redeemable preference shares' was stated to have been made on a private placement basis, "yet, through the same offer, KWIL had approached 105 lakh investors and mobilised funds amounting to Rs47.90 crore."
Since KWIL made the offer to 50 persons or more, the offer qualified as a public issue and had to be listed on a recognised stock exchange.
Indian Bullion Market Association-IBMA set up by NSEL, was also a member of the Exchange. IBMA has reportedly invested Rs1,200 crore in NSEL and the commodities market regulator has asked the Exchange to stop paying any dues to 146 shareholders of the Association without its permission
Commodities market regulator Forward Markets Commission (FMC), which is charged with supervising the handling of payment crisis at National Spot Exchange Ltd (NSEL), has found that Indian Bullion Market Association (IBMA), one of the members of the Exchange, has reportedly invested Rs1,200 crore in the NSEL ready-forward product. IBMA is an NSEL group company.
According to a report in The Times of India, the Association has facilitated a significant chunk of trades on NSEL, thus exposing risks in regulator architecture and raising possible conflict of interest. Moneylife had sought clarity about the role of IBMA in an interview with the top brass of NSEL some time ago. We had asked how IBMA was called an association, a term used by trade and industry lobbies, usually conceived as societies or non-profit companies. NSEL had replied that IBMA was called an 'Association' because it was promoted by NSEL “in a cooperative structure along with various stakeholders such as small jewellers and bullion traders, with an aim to work as an aggregator.” Please the read the whole interview here
NSEL had argued that IBMA, a member of NSEL, “has around 130 bullion dealers and jewellers from across the country as its shareholders. In addition to making representations on behalf of physical market participants, policy makers and market linkages services, IBMA also offers various services to its members such as sourcing of material, clearing and forwarding (C&F)."
According to the top management, IMBA was setup to represent matters relating to bullion trade and industry on the physical side, before various authorities and ministries, who are involved in policy formulation. This role has now been extended to agriculture-based commodities. The futures market’s views regarding policy formulation are being represented by several national and regional level commodity exchanges. It, however, lacked adequate representation by physical market participants (to which futures market is an adjunct). Due to this gap, physical market participants did not have enough say in policies formed by state governments, warehousing regulators and ministries related to commodities.
Shreekant Javalgekar, managing director and chief executive of Multi-Commodity Exchange Ltd (MCX) was also on IBMA board until recently. NSEL holds a 74% stake in IBMA, while the remaining shares are held by bullion traders, the Times report added.
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