GROWTH AND FINANCIAL STABILITY BEYOND THE CRISIS

“Scope For Global Cooperation”

Dr D. Subbaro, Governor, Reserve Bank of India in a recent conference held in

Mumbai on October 27, 2010 said “The past crisis has taught us that no country can be an
island and that economic and financial disruptions anywhere causes ripples, if not waves,
everywhere. The crisis also taught us that given the deepening integration of countries into a
global economic and financial system, uncoordinated responses will lead to worse outcomes
for everyone.”
The financial crisis of 2007-2009 was often compared to the crisis like, ‘The Great
Depression’ of the 1930s triggered by a liquidity shortfall in U.S. Banking System. Many
economists considered it to be the worst financial crisis since The Great Depression as it
showed its impact on various countries worldwide.
In the face of this financial crisis in recent decades, however India’s economy has
performed extraordinarily well. India has become more resilient to shocks of various kinds as
a result of reforms especially with the strengthening of the banking sector.
By all accounts the world has recovered from the financial meltdown. In the latest
World Economic Outlook (WEO-Oct, 2010) the IMF projected global growth for 2010 at
4.8%. Similarly the World Trade which shrank by 11% in 2009 is expanded by 11.4% in
2010.These increase in rates is mainly powered by Emerging Market Economies (EMEs),
which contributed nearly half of this growth and again by import demand of EMEs which is
rising twice as fast as that of advanced economies.
However, on the other hand, advanced countries are growing at the slowing
momentum of recovery & stubbornly high rates of unemployment.
In the G-20 Summit held on April, 2009, all members were deeply conscious that
purely national solutions do not solve global problems and they each need to make an
adjustment to the post-crisis global realities. And this is where global co-operation is most
vital.
The Basel Committee on Banking Supervision on Sep, 2010 put forward a reform that
the banks will hold more & better quality capital & to carry more liquid assets. Similarly the
Financial Stability Forums has been expanded to Financial Stability Board (FSB) which will
give more importance & representation to EMEs.
 The global crisis has shown that the global economy as an entity is more important
than ever. All countries should cooperate not only to exit from the crisis, but also to make
sure that in resolving this crisis, the seeds are not sowed for the next crisis. Global
cooperation is one factor that cannot be neglected at this stage.

By:-
Annie Negi
MMS (Finance)

Ref:-
Speech by Dr D. Subbaro, Governor, RBI, at the ICRIER/DIE Conference held in Mumbai,
on Oct 27, 2010.