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INDIA OUTLINES STEPS TO DEAL WITH GLOBAL FINANCIAL CRISIS

Indrani Bagchi & Saibal Dasgupta

The Times of India, October 25, 2008

India on Friday outlined the steps it wants taken to lift the global economy out of the current financial morass. Addressing leaders of 45 Asian and European countries at the ASEM summit here, PM Manmohan Singh said the first step would be to “de-clog” the global credit markets which had choked up as a result of the crisis.

Second, multilateral financial institutions (MFI) like World Bank and IMF should step in with larger resources to invest in large infrastructure projects in developing countries, which can act as a stabilizer in the global economy.

The primary need, Singh said, was coordinated action to restore confidence in the credit market.

It is now clear that India would certainly be present at the November 15 G-20 summit in Washington. In the past couple of days, US President George Bush has called up Singh to personally ask him to be present. In what was clearly a global reversal of roles, European countries repeatedly asked Asia to lead the way out of the crisis. N Ravi, secretary (east) in the MEA, told reporters that all EU leaders asked Asian countries to refrain from withdrawing into “economic nationalism”.

This is a significant difference from the last 1997 crisis when Asian countries faced the heat when short-term funds exited Asia after a property bubble burst in Thailand to inflict severe economic pain in this part of the world. This time round, it’s the speculation in the western financial markets that has created the economic bubbles which, in retrospect, are bigger than the GDP of many countries.

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