India is now home to a new breed of billionaires: those created by an almost inexplicable rise in the values of the stocks they hold. Epitomising these changes are Azim Premji of Wipro and Narayanamurthy of Infosys. These entrepreneurs from the IT sector, along with others from the entertainment and communications area, are creating new records in the stock markets that are not always warranted by what they have achieved on the ground.
 
Consider the much-publicised Wipro story. On the 3rd of January this year, Wipro's share price ruled at Rs. 2,809. In a bull run that began around the middle of the month, the share price climbed almost continuously to touch Rs. 8929 by February 18th. In a world where stock values are increasingly used to value individual wealth, this close to 220 per cent increase in the course of a month has placed Premji, who owns 75 per cent of Wipro stock, among the world's richest people.
 
Such stories abound, even if they are less dramatic than this example of a move from a position of relatively puny wealth by international standards into the ranks of the world's wealthiest. This easy, even if recent, movement at the apex of the wealth pyramid, has added one more cause for celebration for a globalising intelligentsia (rather loosely defined) which has seceded from the nation which harbours it. That segment had hitherto assessed the success of economic reform by the individual success of people of Indian origin in Silicon Valley and Massachusetts, besides of course their own salaries. Now they can add the emergence of paper billionaires to the list of India's achievements.
 
What is disconcerting is that increasingly market capitalisation, or the value of a company computed on the basis of the price at which individual shares of the company trade in the market, has replaced real asset values as the principal indicator of company size and worth. The top 50 or 500 are now determined by many analysts not on the basis of asset value but market valuation. This is part of a larger disease which assesses the size (and ostensibly, therefore, maturity) of India's stock market based on total market capitalisation.
 
The consequences are dramatic. In 1990, before reform began, total market capitalisation in the Bombay Stock Exchange (BSE) was less than Rs. 100,000 crore - a level that the market capitalisation of Wipro alone crossed on February 2 this year. Aggregate market capitalisation in the BSE stands today at around Rs. 1,100,000 crore, which reflects an average increase of 100 per cent a year during the 1990s. This is not only taken as suggesting a dramatic rise to maturity of the stock market, but as reflecting economic buoyancy, even though it conveys a completely different picture than that provided by GDP growth, which averaged around 6 per cent compound a year. This disjunction of the financial from the real sector, almost mirrors the other disjunction of a part of the Indian mind from Indian reality behind the smokescreen of Hindutva.
 
A result of this dissonance is a rather dubious interpretation of the growing distance between real and financial growth and wealth in the country. This is that India too is home to new economy, consisting of the areas such as information technology, the entertainment 'industry' and financial services, which mediate and explain the distance between the real and financial sectors. These areas, it is argued, are the ones which define India's comparative advantage in a globalising context and are the wealth creators of the new millennium. They are the ones where India is truly part of the world community and can stand on its own. They are the true new temples of modern India, and not steel, power and heavy industry which occupied the Nehruvian mindset. Not surprisingly. according to this view, even while markets are buoyant and wealth is being almost magically created, the Steel Authority of India Limited has to be provided with a massive financial restructuring package, including a Rs. 5454 debt write off, to remain in operation.
 
Forget for a moment that the capabilities and skills that provide the wherewithal for the emerging businesses are a direct product of the past, which now stands condemned. Consider the true nature of the financial expansion that is occurring through India's stock markets. To start with, market values of individual shares are not a reflection of the true worth of the companies involved, but the state of demand for those shares relative to their supply. Demand, at the margin, is clearly being driven by foreign institutional investors in search of diverse portfolios, who now number more than 500 in the country.
 
The tastes for shares of these investors are know to be volatile, shifting across national boundaries and continents for reasons that are not easy to find. But India, it is clear, is the flavour of the times. During the first 18 trading sessions in February, the FIIs invested more than Rs. 2660 crore, which was more than half the annual average investment that occurred during the years since 1993, when FII investment in India's stock markets was first allowed. The inflow during these days was in fact higher than the inflow during the last six months of 1999. Clearly, there has been a sudden surge of interest in India.