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Taming the global economic crisis – Some suggestions

The emphasis should be on evolving a growth model that is more inclusive, sustainable and tackles India's long-standing problems like lack of education and population growth.

By Anubhav Srivastava
April 01, 2009

The viciousness of current economic slowdown has taken everyone including the policy-makers and the corporate heads by surprise. That there are few solutions to the current crisis, even with the leading economists, can be judged from the fact that the Ministry of Finance, India has constituted a committee to invite suggestions from on the Current Global Financial Situation and its impact on India.

Many industrialists also agree that the current economic crisis is not a normal business cycle and the recovery may take as long as two years. However, few in the government and the industry are taking a hard look at some of the fundamental flaws that existed in the Indian economy even before the current crisis came to head. And that there is a need of a change in approach in judging the parameters which indicate the health of the economy.

First of all, it must be understood that the state of the industry or the stock market does not in any way indicate the state of the economy in the country. The media went head over heals when the stock markets were rising and now again over the prospects of millions of people being rendered jobless by the current economic crisis.

What is not realised by many is that more than 90 per cent of the employed personnel in India work in the unorganised sector. Many of these people in the unorganised sector work on absurdly low wages and in unsuitable working conditions. The economic boom that preceded the current crisis has had no visible impact on their lives.
Secondly, outside the big cities, the vast countryside of India continues to remain in shambles. Even basic infrastructure is not available in many parts of the country and growth and employment opportunities are not available to a large section of the people. Since these two problems have continued to exist, it was not right to project the rise in GDP and the surging stocks markets as indicators of robust economic condition.

Thirdly, it must be understood by the policy makers that providing relief to the industry with monetary and fiscal policy measures will have no visible impact unless the above mentioned anomalies are not taken care of. On the contrary, taking steps like decreasing the rate of interest will have a detrimental effect on the finances of the government. 
The central and state governments in India should take measures on the following lines in order to put the economy back on track –
The government and corporate sector should come together in dealing with the current financial crisis which can have a long-term adverse impact on the social fabric of India. There is an urgent need to cut unnecessary spending in the government as well as the astronomically high salaries being given to the top employees by many corporate organisations. There is a need to make the Indian youth, nurturing burgeoning financial expectations, aware of the ground realities and keeping their morale high.

It must be realised that the reason of the current downfall is that the model of unlimited growth and the corresponding rise in financial status of a few at the cost of a vast majority of others was unsustainable. The emphasis should be on evolving a growth model that is more inclusive, sustainable – both for economy and the environment – and tackles India's long-standing problems like lack of education and population growth.
The author is Editor, Policy Proposals For India.