India To Ride The Crisis ...

The World Bank report on "Global Financial Crisis: Implications for South Asia" released on Thursday shows that even as India is relatively more exposed to the contagion effects of global financial markets, risks associated with it are countered by a fundamentally strong macro economy including prudent foreign debt management, high savings rate, solid financial sector health, and a pro-active monetary policy management. These steps will allow India to ride the crisis without destabilizing the financial sector.

Further, the report indicated that the main effects of the global financial crisis will be to reduce the availability of funds leading to higher interest rates and lower public and private investment that will hurt growth.

As far as India is concerned, the report said the current account widened sharply from a surplus of more than 2% of GDP in 2004 to a deficit of over 3% in 2008. Moreover, the report indicates that India had made good progress in reducing fiscal deficit between 2003 and 2007.

Now We Need Him More Than Ever Before

Mohandas Karamchand Gandhi (aka Mahatma Gandhi) is probably the rarest among all those personalities who is loved the most as well as criticized the most. Though he virtually enjoyed a unchallenged position during India's freedom struggle, his economic formulations failed to impress us - even his closest confidants (J.L Nehru & J.P Narayan).

Gandhiji felt that the key to the country's progress lay in the strengthening of the decentralised, self-sufficient village economies. Fundamentally Gandhi opposed machinery because he thought it displaced labour and it concentrated production and distribution in the hands of a few. This is an old question in classical political economy with which Ricardo grappled at length.

The "Gandhian Economics" enlightens us as to how development choices should be made keeping in mind the poorest and the weakest and further recommends that while the basic needs of all people should be met, there should also be consciousness regarding placing a limit on consumption. Probably this was the principle that even "Buddha" preached thousands of years ago.

We more often confuse Economic Index with Happiness Index. One may be poor yet remain always happy. Contrarily, a rich man may not necessarily be happy. Those who view and evaluate "Gandhian Economics" from materialistic level may not get impressed with its philosophy but the kind of real challenges a developing country like India faces, it is only Gandhian responses which can help us out. We should not continue to make the mistake of falling into trap of IMF/World Bank loans and MNCs Foreign Investments and live in a virtual world but instead adopt "Gandhian Economics" and live in real world.