Similarly, it is difficult to miss the fact that there is no more talk about opening up the retail sector to foreign direct investment, while Reliance Industries pushes ahead with its giant rollout plans ahead of any threat or competition from Wal-Mart. In fact, Reliance is also set to become the biggest land owner in the country, buying up tens of thousand acres of land at throwaway prices under a SEZ policy that has clearly gone out of control. It is almost like the power policy of the 1990s, also under a Congress government, which ended in an incredible mess that has escalated power shortages and crippled infrastructure development.

The SEZ (Special Economic Zones) policy, which provides little clarity on the impact of generous tax holidays and myriad concessions on the economy, may also come to a grinding halt, but nobody is complaining because every corporate group is rushing off to grab chunks of valuable real estate to set up SEZs, exactly like they chased power projects in the past.

Astonishingly, there are plenty of large investors who believe that India will muddle through this mess and juggle all the contradictions to keep pushing the reform process.

However, the speed with which the disinvestment decision in Nalco and Neyveli Lignite was rolled back is a cause for concern. As far as capital markets are concerned, they have to balance the impact of this roll-back with the expectation of another round of spectacular corporate results for the recent quarter.

If this suggests a season of volatile market fluctuations, then the situation is unlikely to be helped by the Securities and Exchange Board of India’s (Sebi) decision to permit short-selling by institutional investors, including Foreign investors (FIIs). Sebi’s secondary market advisory committee has apparently recommended that institutions be allowed to short-sell with the caveat that a proper lending and borrowing mechanism should be put in place.

... contd.