At a recent brainstorming session on 'After effects of Financial Meltdown: World Economy', held at the Amity Campus in Noida, Uttar Pradesh, Lord Meghnad Desai expressed his views through a written message, as he could not make it to the event.
In that written address, Lord Desai said admitted that the current global financial meltdown has plunged the world into the worst crises since the great depression of 1930s.
He also said that with the exception of China and India, very few countries are likely to witness reasonable economic growth in coming years.
In his written message, Lord Desai called for a reconfiguration of the fuel use technology, switching over to new carbon efficient technologies and restructuring of financial institutions including International Monetary Fund to reduce the after-effects of economic downturn.
"The global financial architecture needs reform and IMF may need to be restructured to achieve this," Desai remarked.
Stressing and pointing "financial imbalances in the global economy" as the main reason of the crisis, he averred "China accumulated large financial surpluses from its exports. China along with many other countries of Asia over-saved. To make such savings paying someone had to over-consume. USA did this job by running a double deficit on fiscal and external accounts. The global economy had enjoyed a boom for 15 years. Now, there is a setback. Many banks have lost their capital values and the financial sector has shrinked. In OECD countries output loss has been massive -15 per cent in Japan and -7 per cent in Germany".
Lord Desai emphasised, "it is difficult to say who will emerge as new power in the future. Innovations will be called for and once again the United States is most likely to be the innovative economy."
The eminent panelists for the session included Sir Charles Richard Vernon Stagg, High Commissioner of United Kingdom; Daniele Smadja, Ambassador of the European Commission; Levent Bilman, Ambassador of Turkey; Yogendra Kumar Modi, CMD, Great Eastern Energy Corporation Ltd, and Shankar Acharya, member board of governors, ICRIER
Welcoming the august gathering Ashok K Chauhan, president, TGEF, said that India is a unique country which at present is facing negative inflation in the wake of economic meltdown but with its 650 million people below the age of 35 years and 440 million people under the age of 14 years it would definitely achieve its aspired growth rate of 9 per cent.
Dwelling on the various aspects to be worked upon in the wake of the crisis, British High Commissioner Stagg said:"We need to find ways going beyond the recapitalization; find new mechanisms to ensure that the financial markets are allocating capital intelligently, productively and effectively and address the issue of regulations, which is the main task in UK".
He stressed that countries need to resolve these issues with an integrated approach and work collectively, otherwise capital will shift to those markets in which the biggest opportunities lie."
Talking about the international implications of the crisis, Stagg outlined imbalances between China and US due to the unjust measures adopted by China of lending money to the US.
"The need is to find ways to address this without getting into blame game, which may deter people to find solutions ahead," he said.
Talking about the opportunities from the economic crisis, Modi said India can take advantage from this crisis.
India, he said, has to focus on its potentially large domestic market. It needs to ensure that poor masses develop and they get out of poverty, and that the service and manufacturing sector of India has vast opportunities, which needs to be tapped.
He hoped that in future financial regulations will not be developed by few, as happened earlier and banking will be left to bankers and speculation to the speculators.
Expressing his views,T K Arun- Resident Editor, Economic Times said, "five years ahead world will be shaped not only by the fallout of the financial crisis but by other forces that are equally valid, equally relevant and are pursued by powerful nations of the world."
Sounding quite optimistic about the crisis, Turkish envoy Levent Bilman said that the future will be better than today and the situation will improve globally.
Summing up the session, Shankar Acharya said, "Growth in advanced economies will revive but it will be a bumpy ride for them because of high unemployment levels, legacy of both toxic acids and high level of leverage debts and global imbalances. Developing countries will recover their growth momentum but the rate of recovery will be comparatively less from 2003- 07. Global Trade, which is 8- 10% at present, will revive but the benefits of globalization will be less. Fiscal Consolidation will be a major challenge in next 4- 5 years."