Why are there so many holidays?

The move by the Securities and Exchange Board of India to cut the number of holidays in the country’s stock exchanges is more than welcome. The sooner it happens, the better for the market. India has the most holidays — 19 — compared to other major countries; the United States has the least — nine days. But holidays are a malaise that is not limited to stock exchanges, it afflicts the nation as a whole. And what makes holidays in India really pernicious is that they are essentially “political” holidays, typical of a soft state. They are there to please different groups and communities; and in addition to national holidays each state has its own specific ones. One can understand closure on Republic Day, Independence Day or the major festivals of various religions, but why are the exchanges, banks and government shut on so many other days? Every year the number of holidays keeps going up in the name of appeasement. For that matter, why should it be the business of state governments to instruct banks when they may or may not close? Should this not be left to the Reserve Bank of India, whose job it is to regulate banks in this country? All these holidays are in addition to Sundays, when everything is shut, and Saturdays, a full holiday for some and a half-day for many other offices and banks, etc. It is time the government gave some thought to this subject, and in consultation with all sections of society evolved a nationwide code for holidays in India. It might not be a bad idea to take a cue from some other Asian countries. They have far fewer holidays than we do, and most of these are for occasions which much larger sections of society can celebrate. In China, for instance, March 8 is a holiday for International Women’s Day; and there is a Children’s Day and an Army Day. Japan has a Coming of Age holiday, Greenery Day, Vernal Equinox, Respect for the Aged Day, Autumn Equinox, besides of course Christmas and New Year. It will be good, therefore, if Sebi can take the lead and drastically curtail the number of days that India stops working. One can only imagine the loss if one considers the daily turnover on two major stock exchanges, which average a total of Rs 70,000 crores to Rs 1.5 lakh crores, even though almost 80-90 per cent of this is speculative trading. Having said this, holidays are not the biggest reform that Sebi has to undertake; changes that can bring more real business than mere curtailment of holidays will. The one issue crying out loud for implementation is the settlement in derivatives. There is an increasing demand for settlement in futures and options to be done in shares and not cash as it is now. This is now causing considerable damage — making it a speculative rather than investment market. The cash turnover on both the National Stock Exchange and Bombay Stock Exchange is between Rs 10,000 crores and Rs 20,000 crores, while in the futures and options segment it is nearly Rs 80,000 crores. This causes tremors in the market as the settlement day approaches on the last Thursday of every month. The outstanding position in October was over Rs 1 lakh crores, and one could see the effect on the markets as the Sensex plummeted below the 16,000 mark by Friday. Settlement in shares was supposed to be a temporary measure, till the futures and options system was ready. The question now is: how long will this take?