We seem to be quite happy today that our stock markets are booming and the rupee is firm. Nominal interest rates are low (unchanged) and the mood is optimistic. The feel good factor is dominating, but if we look around closely, we see that this is universal in the Asianregion. There are three quick indicators, which came under fire in all the emerging markets during 1997 and 1998. These were share prices, interest rates and exchange rates. These are, by far, the first indicators of disaster and data are available instantaneously. Now, during the meltdown, the Indian performance was encouraging. Have we gone a few steps ahead since then?

Let us look at stock markets first. Stock prices seem to be booming all around us. Between December 1998 (when most countries close their financial accounts) and September 1, our stock prices rose by 58 per cent. This is almost the same as that in South Korea (61 per cent) and Singapore (52 per cent). But, the other East Asian countries are not really far behind. Indonesian stocks have risen by 44 per cent, China by 39 per cent, Hong Kong by 35 per cent, Taiwan and Malaysia (28 per cent) and Thailand (22 per cent). Only Philippines had a low growth of 9.3 per cent.

There are two reasons for this simultaneous growth in stock prices.Firstly, all prices are growing on relatively lower bases. Secondly, there have been good capital inflows from portfolio investors during this period. In fact, the East Asian markets have always been happy hunting grounds for portfolio investors, and foreign perception has turned positive. In the Indian case, net FII investment turned negative in the last month. Ironically, it was the high rise in the share prices that conveyed the impression that they had already peaked and could only drop. This sort of made FIIs net sellers.

Now with interest rates firming up in the USA thanks to Alan Greenspan, it is unlikely that fresh capital is going to move out because there are expectations that the interest rates will be increased further by 50 basis points in October. In fact, the US share prices are rising at such a rapid rate that the Fed has already being called upon to apply the brakes. This will be hastened by the general tendency of FIIs to book profits and withdraw from host countries in November-December.Therefore there will be greater dependence on domestic investors to maintain the high levels of share prices.

Now, let us look at exchange rates. There is a lot of talk of the Indian rupee being overvalued and the need to depreciate the rupee vis-a-vis the dollar. This is debatable since if we claim that inflation is low presently, then the theory that the real exchange rate warrants a higher rupee to dollar value, does not hold. Within the set of 10 Asian economies, which we like to associate ourselves with, India was the only country to witness a depreciation in its currency over the last year (i.e., September 1, 1999 over September 1, 1998). The Chinese (renminbi) and Hong Kong (dollar) currencies remained unchanged, while the others appreciated. This means that the price advantage on account of a lower value of the rupee was available only for us, with the rupee falling by 2 per cent during this period. It is true that most of these Asian economies are going through a correction after a sharpdepreciation in 1997. We are nonetheless operating with an advantage on this front in relative terms, but do not seem to have gained substantially in terms of garnering a higher growth rate in exports. There are questions being raised about the price elasticity of our exports. When the series of competitive depreciation began in 1997, those doing so were able to push up their exports. But, we couldn't.

Short-term interest rates in India today are much higher than those in all the East Asian countries barring Indonesia. During the time of the crisis, interest rates were much lower in India. Short-term interest rates are reflective of liquidity, monetary policy direction, foreign markets disturbances etc., and have a bearing ultimately on real indicators such as investment and GDP growth. Our short-term rates at 9-10 per cent are substantially higher than those in Philippines (7.8 per cent), South Korea (7.4 per cent), Hong Kong and China (6.6 per cent), Taiwan (5.1 per cent), Thailand (3.5 per cent),Malaysia (3.2 per cent) and Singapore (2.4 per cent). In fact, our interest rates have really remained at the same levels as those during the crisis phase.

What does all this mean? Our situation is not very different from that in 1997. The other Asian economies declined but have resurrected remarkably in the last two years. We have had the advantages in terms of not being affected by the crisis in an adverse manner. But, still we have not managed to take any advantage. There are two alternative conclusions that can be drawn here. Firstly, we are not really a "tiger" and such a comparison is not very meaningful. Alternatively, we may have just about missed the cliched boat and will continue to face stiff competition from the other emerging markets. Some hard thinking and redress is required so that our tryst with "emergence" is not relegated only to the history book.