Cong to allies: zip up until CMP

It came late but is being seen as a first step to avert a repeat of Monday on Tuesday. Worried by the free fall of the market, the incoming ...

It came late but is being seen as a first step to avert a repeat of Monday on Tuesday. Worried by the free fall of the market, the incoming Congress government has arrived at a mix of political and market measures to remove the uncertainty among the public over economic reforms.

The Congress has decided it will instruct its coalition allies that no partner should speak to the media on the economy unless the Common Minimum Programme is drafted and approved.

Until then, the sole spokesperson on economic issues would be probable Finance Minister Manmohan Singh.

Following advice from Finance Ministry officials that the drop was in reaction to public8217;s perception that the reforms would get stalled, the Congress plans to make the CMP public as soon as possible8212;Singh said it will be ready in 8216;8216;three-four days8217;8217;8212;to remove this uncertainty.

Singh was advised that the lack of proper information was fuelling the anxiety of the investors. The officials also advised that he issue statement on economic fundamentals being strong for the market to bounce back.

Singh asked the ministry to allay the public fear of a run on money or insufficient foreign exchange. Soon enough, the Reserve Bank of India8212;in a direct message to the foreign institutional investors8212;assured them that it would 8216;8216;intervene directly to meet any demand supply imbalances of the dollar8217;8217;.

8216;8216;While RBI welcomes these flows, it will also like to ensure that those FIIs who wish to reduce the investment can do so as easily as possible at prevailing market rates,8217;8217; it said.

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The central bank said it was closely monitoring the develoments in the share markets and assured that it stood ready to provide sufficient liquidity to the banks to meet their payment obligations, including for any intra-day requirements.

A minute later, the bank issued a second statement saying that the banks could get liquidity assistance from the RBI to meet payment obligations in share transactions.

The RBI statements came at around 1.30 pm, hours after the market had already lost almost 786 points despite two circuit breakers in place.

Within an hour of opening, Singh was fielded by his party to release a statement to instil confidence.

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But when this did not check the market slide, Singh called caretaker Finance Minister Jaswant Singh requesting him to take necessary steps for intervention in the markets.

It was then that the Finance Ministry swung into action with domestic FIs being asked to buy as well as RBI and SEBI being put on high alert.

Joint secretary in charge of capital markets U K Sinha, who was in Mumbai for a bank meeting, was diverted to keep a close watch on the market.

Finance Secretary D C Gupta also got in touch with SEBI and the RBI.

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While SEBI was asked to check out any charges of manipulation, the RBI was asked to maintain liquidity for settlements in the stock market.

There was talk of Manmohan Singh and Jaswant Singh making a joint statement but then each separately addressed the media.

Said Manmohan SIngh: 8216;8216;Our tax policies and FDI will be pro-growth and to create an environment favourable for Indian enterprises.8217;8217; On fiscal policies, Singh said the alliance would seek creation of a favourable climate for investment opportunities for both domestic and international players.

After a meeting at the PM8217;s residence, Jaswant Singh said: 8216;8216;I have discussed it with SEBI and RBI. Although I do not have any authority, my advice is to be cautious.8217;8217;

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Attributing the crash to the spread of uncertainty and lack of confidence, Singh said: 8216;8216;If a responsible leader who aspires to join the government makes statement, it will have an effect on market sentiments.8217;8217; On whether FIIs deliberately manipulated the market, Singh said 8216;8216;I would be extremely cautious in commenting on this issue. We have a healthy market and our economic fundamentals continue to remain strong.8217;8217;