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The ongoing recessions in economies world wide that were supposed to be immune to such
downturn is becoming a serious threat to both the industrialized nations like US and China and
nations constituting the third world countries like India. No doubt, analysts including economists
laureate have began to expect unusual consequences as they eye every stock going down and
witness market acquiring more instability. Fear of stakeholders losing their stock values have
only added to the decline. Go by Barak Obama who said in a speech that it will take another year
for the situation to get better, although added that the worse is yet to come before the situation
gets better.
Recession, in all three forms viz. financial, credit and banking is not new. Over 150 financial
steeps we have seen since past 50 years of financial history. But the current situation is a far than
similar.
Most financial instabilities and economic crises of past history were used to originate in
developing nations earlier and G7 (industrialized) nations were then used to assist the victim
economies by providing all suggestions and solutions to break it. Effects on developed nations
then were not a major issue, or comparatively, not an issue at all. But this time, reverse has
happened with the only difference being that both sides are affected. The current financial crises
had begun in US and travelled slowly to affect EU, eastern and Asian regions.
Dr. D. Subbarao, RBI General in an interview said that the model of banking that the EU nations
has followed since long is been identified as insufficient and prone to give jerks in case of
instabilities like the current scenario. Privatizations seem to be replaced by the model of banking
larger proportion.
What about the situation here?: Indian economy has posted an average growth rate of
more than 7% in the decade since 1997, reducing poverty by about 10 percentage points. India
achieved 8.5% GDP growth in 2006, 9.0% in 2007, and 7.3% in 2008, significantly expanding
educated people skilled in the English language to become a major exporter of software services
and software workers. Due to our liberalization policy that began in 1992 with Dr. Manmohan
Singh, the then finance minister, our economic expansion has helped New Delhi continue to
What hampers our growth and worries all income groups is the rising scale of inflation. Besides
controlling Price and financial stability, enterprises and regulatory bodies such as SEBI and
autonomous authorities like RBI have to ensure that enough credit goes to the developing sectors
such as real estate and inflation is supremely checked. Targeting low and stable inflation is not
easy if fiscal policy is poorly maintained so to devise an optimum fiscal policy is also an urgent
need.
What about jobs cut here: Dr. Subbarao assures in an interview that in India, job cut
would never be an issue, however, companies who are largely dependent on FII and FDI would
suffer. What is happening with the Guangdong province of China is a wide scale consequence of
this. The province that account for over 1/3rd of China’s international trade has seen a shut of
Of course we would not face a situation like US as far as job cut is concerned but there’s nothing
to rejoice upon. We also need to turn to Small- and medium-scale enterprises (SMEs) occupy an
important and strategic place to vision an equitable economic growth and development.
Innovation and Entrepreneurship hold the key to enhancing the role of SMEs in improving the
Indian economy.
Steps: Enough liquidity into the banking sector has been the first step RBI has rightly taken,
followed by a cut in the Repo rate. What can augment to further stabilize the system would be a
comprehensive stimulus package for the banking sector so that investors may not loose enough
confidence to worsen the situation. Focus on improving the scale of foreign investment would
only mark a figure into the box. In a situation like the current, when domestic investors
themselves are refraining themselves from real investing or buying a new share, relaxing ECB
norms in a hope to provide a greater foreign investment window only adds a trifling point.
What is needed in context of foreign investment is to building strong measures first to attract
knowledge, innovation and investments from the overseas Indians including NRIs, PIOs and
Overseas Corporate Bodies (OCBs) on same parallels as we invite expect other foreign
investments according to the Foreign Exchange Management Act (FEMA) and Foreign Direct