One would have thought he would be too busy. Wrong. One would have thought the taxing demands of keeping the banner of communism-as-we-used-to-know-it fluttering aloft would have had a higher priority. Wrong again. West Bengal chief minister Jyoti Basu appears to have both the time and the feeling that the issue of the State Bank of India shifting its foreign exchange dealing room from Calcutta to Mumbai is important enough to not only call for his time, but that of other equally busy gentlemen like the governor of the Reserve Bank of India and the prime minister of the nation.This would have been a joke if it weren't for the fact that it isn't. Of course, SBI has pulled off a fait accompli, but given the current political situation, a cave-in to the unions' demand for reversing this appears all too possible. Which, if it happens, would also mean reversing what I hold to be the two biggest gains of the reforms process so far.
Gain number one was the slowly increasing confidence among investors (bothIndian and foreign) that the era of the mai baap sarkaar, where the leveraging of an omnipotent government was both the necessary and sufficient condition for survival, may be coming to a close after all.
Gain number two actually subsumes from the first. Instead of waiting for the government to find a solution for all their problems, industry was starting to devise some of its own.
This is what the SBI did, at least in this case. In an increasingly tougher market, improving efficiency is the key to survival.
By merging all its treasury operations and by moving the dealing room to Mumbai, the SBI should (in theory at least) improve its efficiency, be able to take a holistic view of the market and react quicker to changes.
Any increase in efficiency ought to help the bottomline. Ergo, any such move should be to the benefit of SBI's shareholders - which should be the over-riding objective of any professional management.
This is not to say that employee interests should be ignored altogether -just that they cannot have a higher call than the first, in financial matters at least. That's the tougher face of reform which Indian industry - both employers and employees - are beginning forced to recognise.
Actually, the move should have taken place ages ago. The only reason the forex dealing was done out of Calcutta in the first place was the fact that the England-India undersea communications cable hooked up with the local network in Calcutta. This made communications with London, the principal money market, considerably more reliable. Also, the Pound was the lead currency for the rupee. This is why even today, the Pound exchange rate continues to be called the `cable' in dealing rooms.
Satellite and microwave communications changed all that ages ago. But the SBI's dealing room stayed put. Others, also in Calcutta for the same reason, managed to up sticks to Mumbai without much fuss. The reason they could and the SBI couldn't (although it made sporadic attempts earlier) - was the size of itsoperations.
The SBI was and continues to be the largest player in the domestic inter-bank foreign exchange market.
This meant a large establishment - more power to unions - and also local vested interests. As long as the government owned everything, moves could be stalled.
Now it does not; not even the SBI, although it remains the largest shareholder. If it also behaved as one, instead of the government, it will send a better signal than any Moody's rating.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
