India is not going to hell

In reality, this is almost entirely a reflection of both the natural predilection of sober and sound (and respected?) analysts to continuously believe that the sky is falling, and the commercial instincts of media organizations telling them that selling negativity is the only way to make money.

The truth is that, despite the foibles and fumbling efforts of our policy makers, India is, just below the surface, cooking with gas.

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Every time you turn around there are individuals, citizens, groups who are - and have been for years - steadfastly working away at changing the system.

The leading light, of course, is - and, for me, always will be - Bittu Sahgal, who has, for 40 years, been enhancing both the physical and belief environment of India, while, and this is the key, remaining a happy (and lovely) man.

Then, there is Praja (www.praja.org), a non-profit organization that I am involved with, which is run by Nitai Mehta and Sumangali Gada, who also manage a successful export business.

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Praja has been working for over a decade to increase transparency and improve communication between elected officials and the citizens.

Their research is now widely accepted as reality, and their MLA and corporator report cards are actually being used in advertisements by elected officials - certainly, the ones that rank well.

Last week, I was fortunate to be introduced to PRS Legislative Research (www.prs.org), yet another committed group of people, who provide high-quality research to MPs on Bills put before Parliament.

They have been at it for six years and are generally acknowledged - by the media and, more importantly, MPs - as a highly credible source of non-partisan information.

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They have recently launched another initiative called Lamp - Legislative Assistants to Members of Parliament - where they match young people (college graduates, some MBAs, and so on) with MPs, to provide them with detailed research support.

In richer democracies like the US, elected representatives have considerable research support paid for from the government budget.

PRS currently funds this programme - 15 assistants last year, 46 next year - out of its own budget, and is in process of shifting the funding to the MPs themselves.

Despite the political circus that our Parliament currently resembles, there is little doubt that more knowledgeable elected representatives is a critical step in the right direction.

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So, what does all this have to do with financial markets?

Well, it confirms that, short-term failings notwithstanding, the India story is alive and well, and, importantly, can accelerate at any time.

Indian equities at 16,000 and the Indian rupee at $50-plus are an excellent buy - provided, of course, your time horizon is at least a couple of years.

This means that companies with unhedged ECBs (and other dollar liabilities) who find their hearts thumping frighteningly can go easy on the whisky, instead designing hedges that protect them in the near term (two years), while retaining as much opportunity as possible in the medium term.

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The Reserve Bank of India needs to do its part by correcting its derivative use circular to permit any company that complies with reasonable governance criteria - even if it does not have a net worth of Rs 200 crore (Rs 2 billion) - to use accepted structured products.

In the shorter term, volatility will continue to rule the roost.

On the one hand, it is becoming increasingly clear that Tante Merkel is calling the shots in Europe, which is the best possible thing.

She is a smart lady and I wouldn't ever want to play poker with her.

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She will certainly push the button before it is too late, which will lead to a huge relief rally in the euro.

This is probably why the euro is perking up a bit right now.

On the other side, the dollar bull is stomping its feet in the pen, and the snorting is getting more audible. Already, the unemployment rate has fallen sharply below nine per cent, making Barack Obama's re-election more and more of a certainty.

And while the analysts and economists continue to fret about the deficit and political failure, on the ground, things are not as bad as all that.

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I have a close friend with a small business in California that designs, manufactures and sells the most wonderful household accessories - not cheap, and certainly not non-discretionary.

He told me business was up 20 per cent - count it, 20 - over the last year.

And this was with the same product line and no price increases.

TCS, Infosys and the rest are hiring like crazy. Maybe they don't know what they're doing, but I believe the US economy is well on the mend and the market is one step away from a serious dollar rally.