Column : Learn to love a rupee that’s convertible

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Column : Please don’t do much

: Just as some people appear to undergo near death experience, India seems to undergo near capital convertibility experiences, the latest one being the possibility of dual listing for the shares of Bharti Airtel.

As has been pointed out by this newspaper, listing of shares of Indian companies abroad is not possible in the present financial regulatory structure. Bharti’s shares, if they are listed in South Africa will have to be quoted in the home currency, that is rand.

This is a different situation from that of global depository receipts, which Indian companies use to raise money from markets abroad. The receipts are quoted in stock markets, in dollars and pounds. But those are instruments issued by the banks in those countries against shares issued in Indian rupees by Indian companies.

That intermediary would not be in existence in the case of the proposal put up by Bharti and MTN jointly. The implications of the proposal being rejected by the Indian government will have to be sorted out by the two companies for their eventual merger plans, but the larger issue is one of convertibility.

To their credit, finance ministry officials have said they are, in principle, in favour of letting the dual listing happen. This is in consonance with the position taken by the government to move towards full capital convertibility.

What the government apparently does not favour, is being pushed into a decision because of one such deal. In principle, this is a valid stand.

But there are basically two ways in which governments are often called upon to make a major policy shift. The first of these is a crisis. It was the response to the balance of payments crisis of 1991 that set us off to dismantle the licence-control raj and usher in liberalisation of which we are reaping the rewards. Sure, the government at that time had little room to pull back from taking those decisions.

The other opportunity is when sectors clamour for a change of rules. In 2009, the department of industrial policy changed the FDI guidelines substantially through Press Notes 2, 3 and 4, in response to needs expressed by industry. In tax policy, such changes are of course de rigueur.