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Is the Next Multi Year Bull Run Here?

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Our last article was all about the conversation with Mr. Mehta an investor about going back to the golden era of Indian economy. Click here to read the article.

After pointing out a few charts on why we’re all set to revisit the golden phase of 2003-2008, Mr. Mehta was eager to know if the Indian indices shall grow 6 times from hereon.

So coming back to the conversation from where we left yesterday, he asked me, “Tell me more on the fundamental strength of an economy. I am listening to a lot of negativity out there.”

“Do you remember the economic reforms undertaken by the government during 1999-2003, which set the foundation for the rapid growth in the next few years.”

“Yes somewhat. I remember the Golden Quadrilateral and the Pokhran nuclear test,” he replied.

“Well, Mr. Mehta, you are right to a great extent. However, it was not just about the Golden Quadrilateral or the nuclear test. There were a host of other reforms too. Most of us consider the year 1991 as the watershed year in India’s economic reforms. However, there were some path-breaking reforms initiated by the government then, which deserve a huge applaud. Let me give you a quick recap,” I told him.

Hence, I showed him the list of reforms undertaken by the government then during 1999-2003.

Fiscal Responsibility Act

The NDA government in 2003 enacted the Fiscal Responsibility and Budget Management (FRBM) Act to reduce budgetary deficits and boost savings in the public sector. It is a well-known fact that the whole idea of keeping fiscal deficit under check at 3% of gross domestic product (GDP) can be credited to the then government.

Telecom Reforms

India now has the second-largest base of mobile phone users in the world. It was the government’s initiative during 1999-2003 that ended the state monopoly of BSNL and MTNL in the telecom sector in 1999 and introduced a new Telecom Policy where a revenue-sharing regime was started. This revenue sharing model was effective for making call rates and mobile phones affordable.


The government in 1999 first set up a separate department for disinvestment. Large disinvestment initiatives undertaken in this period include companies like Bharat Aluminum Company (BALCO), Hindustan Zinc as well as Videsh Sanchar Nigam Limited (VSNL), and hasn’t India benefitted a great deal from them?

Opening up of the insurance sector

Until 1999, state-owned entities had a monopoly in both life and general insurance segments. NDA government allowed privatization by permitting foreign direct investment of up to 26%. This led to several global insurance companies entering India, hence giving an extremely strong boost to the sector.

Massive infrastructure development

The government during 1999-2003 laid the foundation stone for the Golden Quadrilateral project on 6 January 1999 to establish faster transport networks between major cities and ports, provide smaller towns better access to markets, reduce agricultural spoilage in transport to drive economic growth. During 1999-2003, India also witnessed a massive public investment in highways and roads, which had a significant multiplier effect on rural economic growth. The government had devised a sustainable funding model through the petrol and diesel cess for the highways.

“To summarize Mr. Mehta, during 1999-2003, the Indian economy had to face significant challenges due to Kargil war, nuclear sanctions and dot-com bust induced global recession. However skillful macroeconomic management by the government then resulted in a virtuous cycle of lower inflation and interest rates, along with low fiscal deficits, leading to higher investment and higher economic and export growth. This was also a period when foreign investment inflows surged to record highs. So, it can be rightly said that the foundation for high growth witnessed by the Indian economy during the golden years of 2003 to 2007 had its roots laid down in the previous years,” I explained.

Mr. Mehta by now looked immensely surprised.

“Well Mr. Mehta, picture abhi baki hai” I told him.

\”I have only told you about the economic reforms undertaken by the government between 1999-2003. The real reason why we started this discussion has still not been answered,” I said.

This is where the real story starts.

Read more:  How Long-term investing helps create life-changing wealth – TOI.

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