Sarkar not mai-baap

India8217;s stock markets are as keenly reactive as they have been in recent years to crucial global economic developments. The sharp interest rate cut by the US Federal Reserve has cheered moneymen around the world, although economists differ on whether the cut will halt an American recession or is a firm signal that a downturn is on the way. Whatever happens to the American economy will affect us, and it would be crucial and interesting to see what kind of domestic counterbalancing a big country on a high growth path can generate if and when faced with a US recession. But for now it is entirely appropriate to savour the increasing maturity of India8217;s stock markets and the underlying maturity of its economy.

The point about Sensex at 16,000 is not so much that another by-definition arbitrary numerical landmark was crossed. It is that market players are voting for India8217;s economic coming of age. Think about it, when politicians dismissed disinvestment as a policy option when this government came to power, the market tanked. The market has tanked after that. And the Sensex may drop again. But in the recent past and currently, the market has learnt to look beyond the politics of the day to the fundamentals of the present. Which is why the current political crisis at the Centre has at most wobbled the market, not sent it into a long sulk. This is a hugely positive change and one of the surest signs that the economy and the financial system are acquiring depth and width that allow them to absorb sarkari shenanigans. The government is always important for the market but it is not necessarily mai-baap for the market any more.

The related question, explored in these columns earlier, is how much insulation does economic growth have from political crisis/policy stasis. It must be said 8212; and the prime minister needs to be commended for this 8212; the UPA has followed the old-fashioned medical advice when it comes to economic policy: first, do no harm. Real reforms have been virtually absent. But so have been real reversals. The next government will, however, find that it has to take calls on various policy issues quickly or risk smothering India8217;s growth impulse. That is something the market will react very badly to.