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- Y. Venugopal Reddy, who was the 21st Governor of the Reserve Bank of India from September 2003 to September 2008, won international acclaim for his deft handling of India's monetary and external sector policies that famously saved the country from the worst consequences of the global financial and economic crisis of the period 2007-09.
- The downgrade of U.S. sovereign debt and the burgeoning debt crisis in the eurozone, have created fears of another global recession. Stock markets everywhere, including in India, tumbled.
- I agree with you that the crisis of 2008 and the incident or event of 2011, are somewhat similar. However, the crisis of 2008 was due to the wrong policies of the past, while the recent event is a failure of policy response to the crisis in the United States
- the recent event is not a new crisis; it is a continuation of the old one.
- The recent event is, in a way, due to polarised views on policy and also the result of the “make-believe world” of recovery that has been carefully projected by financial markets, resulting in a disconnect between the real economy and the financial markets.
- It is premature in the sense that the predominance of the U.S. will continue since its relative position, relative to other countries such as the euro area and Japan, remains to be significantly superior, as before.
- The U.S. budget-related crisis and the debt crisis in the eurozone have some common features. Both of them are rooted in politics but have global ramifications.
- the dollar is a primary dominant reserve currency, while the euro is a secondary reserve currency.
- In regard to the euro, there are important institutional constraints for distributing the burden between different sovereign nations that constitute the eurozone, and between the banking systems of individual countries legally and a constrained central bank
- The “decoupling” theory, which says that fast-growing economies such as India need not depend on global cues
- The decoupling theory was developed soon after the financial crisis erupted in the U.S. and the euro area in 2007-08. It's “contextually convenient, but inherently illogical.”
- We cannot extol the virtues of globalisation when the global economy is booming, and suddenly discover decoupling when there are problems.
- We had a balanced economy, and, therefore, we could withstand the impact of the crisis better than many others. However, the initial position in 2011 for India is different from [that in] 2008. Our fiscal position is weaker both in quantity and quality. The external sector position is weaker both in terms of stock of assets and liabilities, be it quantity-wise or quality-wise, and flows in terms of current account deficits. Domestically, both public and private investments seem to be somewhat subdued, while supply inelasticities have set in.
- Above all, in 2008, we entered the crisis with confidence in terms of both growth and inflation, while the sentiment today is less confident than before. The redeeming feature, perhaps, is that the events in 2011 may not indicate a serious crisis, but would indicate uncertainties, volatilities, divergent growth paths, divergent policies, etc. The challenges for policymakers are different, way forward.
