A Clash of Economies

Posted on 2009-06-26
COMING a day after the World Bank’s warning that the global financial crisis is set to worsen and the world will witness a slower growth, the statement of the Planning Commission Deputy Chairman Mr Montek Singh Ahluwalia that the worst is behind us and India’s economic growth will show firm signs of revival during the second half of 2009 does not inspire optimism. India has a strong and viable domestic market, but how long will it sustain industry? Exports are falling, manufacturing is on hold. And both urban and rural consumer spendings are down. Though job losses are not as severe as in the US, thousands of people have been laid off. The World Bank wants tighter and better supervision of the financial system. However, it would be wrong to dismiss Mr Ahluwalia’s optimism outrightly. The many ways in which the central government has been trying to inject life into an economy shocked by the global recession – through stimulus, bank rate cuts, government spending on infrastructure and other heads – has shown that if good measures are taken we can tide over the crisis. There is some push factor working for consumer spending, as reflected in the rise in auto sales. And despite the forecast of less-than-normal monsoon this year, industry expects rural spending not to contract severely. Banks are sitting over huge funds and are working hard to induce credit offtake by reducing interest rates. The World Bank has the habit of looking at the global scenario from the western point of view. Indian economy has its own resilience and momentum and no time is better than crisis time to show that to the rest of the world.