It outperformed the dollar by 25 per cent, the Yen by 14 per cent, the Pound Sterling by 13 per cent, the Euro, by 9 per cent, the Swiss Franc, that major recipient of safe haven funds, by 7 per cent, and the rupee by 14 per cent.

To continue with the suspense, it outperformed the FTSE by 52 per cent, the Dow Jones by 47 per cent, the Nikkei by 44 per cent, and the Sensex by 19 per cent.

And finally, on January 27, 2003 it reached price-levels it hadn't seen since 1996 and was quoting at $372 per troy ounce in London and Rs 6000 for 10 grams in Delhi.

The wonder 'it' is gold: internationally, the precious metal's prices increased 23 per cent between January 1 and December 31, 2002; on the domestic market, the figure was a no less impressive 20 per cent. "Geo-political currency concerns, the performance of the equity and bond markets and, in the case of Argentina and Japan, the risks in the banking sector have made gold a safe investment," explains Hiroo Mirchandani, Associate Director, Jewellery (India), World Gold Council (WGC). Several other factors played a part in increasing gold's lustre: Enron and WorldCom have turned investors off equities and the possibility of a US-Iraq war and North Korea's born-again nuclear ambitions has forced individuals and corporates to look for a safe investment vehicle (gold is one).

Indian retail consumers, traditional heavy-hitters in the business, strangely went cold to the metal's appeal in 2002: imports dropped 30 per cent compared to the previous year. And the country's corporates did what they always do-stay off gold. Companies like to park their surplus funds in fixed-income instruments, explains Ravi Ramu, Chief Financial Officer, Mphasis-BFL, a Bangalore-based software services firm, not gold.

Globally, a company that wishes to invest in gold can buy bullion, or a gold certificate from banks (backed by bullion), execute futures and options contracts on a commodity exchange for metals, or opt for a gold mutual fund or a hedge fund-the last mentioned have traditionally been big players in bullion. In India, the future and options route is out, as is the gold funds and hedge funds (they can't operate in India) ones. The reason for India Inc's diffidence: it views, as do companies in most parts of the world, gold as an unproductive asset. "Investing in gold does not provide capital protection," says Suresh Senapati, Corporate Executive Vice President, Wipro. "Wipro's investments are always in short-term liquid funds." Still, looking at gold's performance in 2002 one can't help but think that World Inc needs to reconsider its approach to the yellow metal some.

-Ashish Gupta

IOUs
Till Debt Do Us Apart
Guarantees could do the Maharashtra state government out of a home.

Asimple guarantee for a mere Rs 50.69 crore could land the Maharashtra government in hot water. The borrower, Sindkheda Co-operative Sugar Factory, having defaulted on the loan, and the government having washed its hands off the matter, the consortium of lenders has dragged the latter to the debt recovery tribunal (DRT). If the DRT rules in favour of the creditors, the state secretariat, Mantralaya, and all bank accounts of the government could be attached.

Confederation of Indian Industry (CII) estimates place the value of guarantees issued by states across the country at a staggering Rs 1,65,000 crore in 2002-03 and crisil estimates that Rs 44,000 crore of this will come up for redemption in the next five years. States like Maharashtra had no option but to play guarantor: their rising revenue deficits meant guarantees were the only way they could fund projects, largely in the areas of power and irrigation. The states couldn't have chosen worse: political compulsions make it well nigh impossible for them to raise user charges for power or water. Ergo, already close-to-bankrupt states have no option but to dishonour their guarantees. ''Consequently, refinancing debt will become increasingly difficult,'' says Arun Kumar, Director, Infrastructure Rating, CRISIL. That's the last thing the already stretched Indian financial sector needed: A Rs 1,65,000-crore bomb.

-Ashish Gupta

CAN CAN
Let's Get Selfish
India's strategy for the Cancun ministerial summit of the WTO gets a surprising machiavellian twist.

Commerce Minister Arun Shourie: He's certainly read The Prince

Murasoli Maran's memorable last-man-standing act at Doha may have won him accolades within the country and in other developing nations as the saviour of the Third World, but new Commerce & Industry Minister Arun Shourie won't try and emulate that at Cancun. India, the thinking at Udyog Bhawan, the commerce ministry's GHQ, goes, should no longer oppose every move by the First World to liberalise global trade. Instead, it should seek to serve its own ends. If that requires playing one group of developed countries against another, says a senior official at the ministry, so be it.

In agriculture, explains Manoj Pant, a Professor at Jawaharlal Nehru University's School of International Studies, India's strategy will be to align with the European Union against the US and the Cairns Group (Australia, New Zealand, and agro-product exporting nations from South America)-the latter is all for reducing subsidies on agricultural products, political anathema in India. The alliance with the EU could have some fringe benefits: India may be able to extract some concessions from the bloc on issues related to child labour and the environment which threaten to disrupt its trade with the Union.

The strategy of aligning with the various blocs also serves to address India's inadequacy in presenting position papers-documents listing concessions the country is willing to extend, and those it expects in return in areas like industrial tariffs and subsidies. With India Inc. undecided on the subject of industrial tariffs, and good trade lawyers in the country few and far between, piggy-backing a like-minded country or group of countries may well be the best way forward. It's altogether machiavellian.

-Ashish Gupta