DO YOU KNOW who is called the father of the Indian stock market? Although no one has been officially given this title, veteran investors, including Ramesh Damani, credit George Fernandes for his contribution to the Indian stock market. Damani has referred to Fernandes as the ‘father of the Indian stock market’ for the role he played during his tenure as the Union Industry Minister from 1977 to 1979.

George Fernandes was the Union Industry Minister in 1977. His policies marked a major turning point in public equity ownership in India and laid the foundation for wider public shareholding. Under his policies, multinational corporations (MNCs) were required to dilute their foreign shareholdings, giving retail investors an opportunity to buy shares in major companies.

Why is George Fernandes called the Father of the Indian Stock Market?

Fernandes was in jail, like many other political leaders during the Emergency. He was arrested in Kolkata (then Calcutta) in June 1976 and lodged in Tihar Jail, Delhi. He was accused of conspiring to overthrow the government by force and using explosives to blow up Parliament and railway tracks. The case was known as the “Baroda Dynamite Conspiracy.”

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In 1977, Fernandes contested the parliamentary elections from jail and won by a massive majority. After his release, he was appointed Union Industry Minister under the leadership of Prime Minister Morarji Desai. After becoming the union minister, he introduced a policy that forced major multinational companies like Coca-Cola and International Business Machines Corporation (IBM) to leave the Indian market as they refused to dilute their foreign equity stakes.

The roots of this decision go back to 1973, when a dispute emerged between the Indian government and multinational companies following an amendment to the Foreign Exchange Regulation Act (FERA). The amendment limited foreign equity ownership to 40%. Companies with foreign equity exceeding this limit were required to seek fresh approval from the Reserve Bank of India (RBI) to continue their operations in the country.

In September 1977, Fernandes made it clear that he had no second thoughts about his decision and that multinational companies had to follow Indian laws to do business in the country. As a result, several companies that refused to comply with FERA (1973) left India. Some of the major companies that exited the Indian market included IBM, Coca-Cola, Kodak and Mobil.

However, several other companies, including Colgate-Palmolive, Hindustan Unilever Limited (HUL) and Nestlé, decided to stay and comply with Indian laws. These companies diluted their foreign equity through public share offerings, giving Indian investors an opportunity to purchase their shares. This helped increase public participation in the stock market, expand Indian ownership in major multinational companies and build an early equity culture in the country.

Who was George Fernandes? 

George Fernandes (1930–2019) was a prominent socialist leader who worked for the welfare of people during the socialist movement of the 1970s in India. He was a senior leader of the Janata Dal and later started his own party, the Samata Party. Fernandes was a passionate leader and powerful orator who was often called a rebel because of his commitment to fighting for the rights of poor people and low-paid workers. He became a national figure after leading the railway strike in May 1974.

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George Fernandes was the president of the All India Railwaymen's Federation (AIRF) when he led a railway strike involving around 1.7 million employees. The strike lasted for 20 days, from May 8 to May 27, 1974. The demands included an eight-hour working day for locomotive staff and an increase in salaries, which had remained stagnant for many years. Under George Fernandes's leadership, around 1.7 million railway employees went on strike.

During the Emergency imposed by former Prime Minister Indira Gandhi in 1975, Fernandes went underground in resistance but was later arrested in 1976. He also played an important role in the formation of the National Democratic Alliance (NDA). At the time, Congress was the ruling party and the opposition was scattered. Fernandes helped bring opposition parties together as the NDA's convener to challenge Congress.

When the Atal Bihari Vajpayee-led NDA government came to power at the Centre in 1998, George Fernandes served as India's Defence Minister (1998 to 2004). He also played a crucial role during the Kargil War in 1999, ensuring that the armed forces were mobilised efficiently. George Fernandes died on January 29, 2019, at the age of 88, after suffering from Alzheimer's disease for a long time.

[OG/VP/VS]

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