First and foremost, the high interest rate was seen as a hindrance to lowering interest rates on a wide front, both on the lending and saving sides. Industry had a stake in the issue as it had to offer competitive rates to attract deposits. Banks too had the same problem. In turn, the lending rates could not be brought down.

For over two years now, both the government and the industry have been eyeing the bulky provident fund chests rather lustfully. A benevolent consideration to the interest of those who saved through provident fund was nowhere in sight. If you want a case history of how governments and various bodies take an ad hoc approach to governance, look no further than the PF issue. Constant and repeated attempts are being made by interested groups to force their half baked opinions on vast masses. The sole criterion is what they stand to benefit.

The government, the industry and everyone involved with the capital markets wanted the provident funds to be brought into the equity markets. It is one thing that in developed countries, retirement funds are invested in global equity markets. But it is quite another to replicate the model here. Such funds in the US have the option to invest all over the globe. Fund managements there have long established track records and the investing trusts can tap on high and proven expertise. Comparatively, India is still in a nascent stage.

That is not the only risk. The domestic provident funds would have to invest mostly in domestic equities. It is not surprising that provident fund managers were far from keen, in fact were averse, to investing in stock markets; not very different from the banking industry, which too was allowed to park part of their annual incremental accumulations there.

The reasons are crystal clear to everyone, but those who can't wait to get their hands on these funds for their own selfish ends. Stock market trends are now controlled and moved by a few powerful groups. The FIIs play a dominant role; next come the local institutions and the speculative lobby. The mutual funds with its high accretion rate of late, has come to have an effective say now.

These groups can and do move the markets to benefit themselves at every opportunity. That would go against the prudential approach that should mark provident fund management for assigning their funds to such managers. That would be risking too much. The Indian market also has a highly volatile nature. Partly, this is because there is still much infirmity and kinks in the structure of the Indian economy.

The infirmities arise from government quarters. The stage of political development in the nation does not allow the economy to be managed in a rational way. Economic management gets politicised almost all the time.

Factor that into the global scenario for the fund managers, who can shift from India to other places as opportunities arise. Or consider the fact that investment or disinvestment in India would be dictated by developments in other parts of the world from time to time. You will understand the roots of the risks involved in the Indian stock markets. Additionally, the provident fund managers would simply be at the mercy of other fund managers, whose integrity, ability and loyalty would be a matter of speculation.

Remember how many PSU treasury managers believed Harshad Mehta and bought grief for themselves? Such phenomenon can take birth again and again in various avtars. Under the present stage of development, it would be foolish to expect that fund managers would put the provident fund interest first before their own. Now back to the interest rate. The provident fund interest rate cannot be treated in isolation. Surely, given the lower administered interest rates elsewhere in the economy, the government would simply love to lower the PF interest and save borrowing costs to itself.

But that would be robbing the poor of their bread so that the King can have his cake. If the government can find no takers for its gilts at lower interest rates, how could they isolate provident fund for cost cutting?

Government's high fiscal deficit, profligate spending and high borrowings are the roots of the problem. Any piecemeal solution will be an outrage.The government is both unable and unwilling to cut its expenditure. In the last Vajpayee government, hordes of ministers were holidaying in UK, on pseudo-business trips, disregarding what its costs the nation. Vajpayee could only grumble. This is likely to repeat itself. With such a character, how could the government dare to hit the poor PF holder below the belt, while its ministers splurge themselves?

Politics is no longer practised for the purpose of serving the nation, but rather for serving oneself. Or for finding a fat pay packet, perks, cheap accommodation and foreign trips. Under the circumstances cutting provident fund interest rate would have been an unpardonable.

With ministerial berths being allocated on political considerations rather than management ability, what we can expect is only milking the treasury by the ministers, perhaps aided and abetted by their secretaries. And let us see what the government can achieve at the forthcoming round of WTO talks. These will impact the fortunes of corporate India and the investors in stock markets significantly. Not only will the tariff regime for India be decided there, but also the future of Indian agricultural economy and exports.

The prime minister has declared that India will be a great economic power shortly. The investor hopes that he is talking out of his ability to deliver than just irrational eloquence.

Is it then any surprise the stock markets are not breathing freely but holding out to see if the government means business?