As the financial crisis spreads like wildfire, global emerging economies are suffering more and more serious consequences. With regard to global economic recovery, India will play a decisive role on whether emerging economies can effectively tackle the financial turmoil. As one of the key members of emerging economies, India is taking a series of measures to enhance the reform of the global financial system while stabilizing its domestic economy. The endeavor India is making reflects the determination of emerging economies to cope with the crisis.
The Indian market has dropped by 60 percent and central foreign exchange reserve shrank by 63 billion US dollars for six consecutive months this year. The IT service outsourcing industry India is always so proud of made little profit because 60 percent of their clients are in Europe and the Americas. The real estate sector finds it difficult to go on due to the crack in the capital chain. The industrial growth rate stands only at five percent, half of last year’s level. And the SMEs, regarded as the backbone of Indian economy, feel it’s even harder to get capital. According to statistics, the economic growth in India this year will drop from 7.5 percent to 7 percent, terminating the fast growth of nine percent for four consecutive years.
India has been suffering from inflation since early this year, with the highest rate registering at over 12 percent in October. Taking into consideration the general election next May, Singh’s administration took a tight monetary policy early this year, which helped to control the inflation to less than nine percent.
However, as the international financial environment changes, Singh’s administration had to take the more courageous measure of carrying out a proactive fiscal and monetary policy.
The three-time rate cuts by the Indian Central Bank within four weeks have brought the interest rate down to 7.5 percent. The commercial banks followed suit by lowering the interest rates of loans granted to State-owned enterprises and individual credit rates. The government will also invest a total of 14 billion rupees to increase farmers’ loans and income as well as fertilizer subsidies, increase income for civil servants and the speed up of road and infrastructure construction in rural areas. Prime Minister Singh also called on large enterprises not to reduce staff so as to stabilize the job market.
Singh’s effort strengthened the confidence of Indians in tackling the financial crisis, and played a positive role in stabilizing the market preventing the crisis from further worsening. In October, the commodity price was stable, and consumption by urban and rural residents rebounded. The surge of capital greatly improved liquidity, and to some extent, stimulated the investment tendency of some enterprises creating more jobs for urban and rural residents. The surge of domestic demand has laid a foundation for stable economic development.
After all, India is still an emerging, vulnerable and fragile economy with a large population. Like what Singh had said at the G-20 Summit, the emerging economy like India was not behind the financial crisis, but suffered greatly from it. Doubtlessly, the economic slowdown and economic deterioration will throw millions of people back to poverty, and make medical care and public education worse. These negative impacts will probably not take effect immediately, but will affect succeeding generations.
It is because of the catastrophic financial crisis that India realized that combating financial turmoil and enhancing the reform of global financial system must go hand in hand. At present, the Indian government is progressively pushing forward the reform on international financial system, hoping to play a vital role in the process.
Singh said early that the international community must seek closer cooperation to reduce the impact of the financial crisis upon developing countries and their abilities to cope with it. But for the long-term prospect, actions must be taken to reform the global financial system and fundamentally avoid the crisis from happening.
India is doing its best to tackle the crisis and efficiently push forward the reform of financial system, which will undoubtedly give the emerging economy an important role in global economic development.
By People's Daily Online
|
Comment
Tell A Friend
Print Format
Save Article