To me, economics seems to be a highly specialised subject, and I hesitate to pass comments on it, especially when I see economists themselves differing widely on the same issue. But when one is called upon to do exactly that, the best one can do is to try to rise to the occasion.
Like a cameraman taking pictures and joining them together to form a story, I will assess the globalisation-recession-the Indian impact connection in a series of takes.
Take one: There was a time when the world was more or less like a collection of rooms that were structurally separated. If there was smoke in one room, its effects remained largely confined to that room itself.
image source: a880c9.medialib.glogster.com
ADVERTISEMENTS:
With globalisation, the world has turned into one vast hall laid out with partitioned cabins of various sizes whose walls go only half-way up to the ceiling. If there is smoke in one room, it spreads easily to all the rooms around.
In the present state of the world, economic recession in one country has an automatic fallout in many other countries as well, especially if the country holds centrestage in economic affairs, like the United States does. Recession there is like a gigantic smoke whose fumes will curl out far and wide.
Take two: India’s first reaction to the global recession was that she would stave off its ill effects because of her domestic demand. That is not the way it worked out. The outsourcing industry which employs more than two million people was adversely affected. There was a sharp drop in exports.
ADVERTISEMENTS:
What with a majority of Indian IT firms deriving at least seventy- five per cent of their revenue from the US, software multinationals in India began freezing wage increases and slashing salaries. Aviation, the automobile industry, the tourism sector and manufacturing all felt the heat. There was a drastic fall in inward remittances from non-resident Indians. The GDP declined.
The Union Home Minister, P Chidambaram, observed that India was not facing recession but a slowdown. The worst blows fell on those countries whose economies were export-oriented. Thankfully, India did not fall into that category.
Take three: For lack of definitive statistical data, India’s huge and vibrant informal economy often does not feature in discussions on the subject. But, by providing markets for goods and services in which there might not have been any trade otherwise, it serves as an invaluable cushion against recessive trends.
Take four: The Americans live in a credit-card culture which, in a sense, amounts to living and trying to prosper on borrowed money. When the going is good, that is fine; but when the chips are down, it can snowball into the kind of crisis that struck the US economy.
ADVERTISEMENTS:
Though credit-card culture has made some headway in India, it is yet to grip the nation as a whole, and perhaps this has shielded us, to some extent, from economic setbacks.
Take five: As a Shakespearean adage observes, ‘Sweet are the uses of adversity.’ Some analysts have pointed out that the economic reverse is a prod to self-analysis, innovation, and new initiatives; and the Director General of the Indo-German Chamber of Commerce feels that ‘German companies suffering from the recession back home should take this as an opportunity to set up shop here…’ because ‘.. .you get more value for your money; you are able to get land, people, and power at more affordable rates.’ That would apply to other first-world countries as well.
Not a few experts hold that the global recession is already ending. Dawn is breaking through, and though the mists may take some time to clear, there is reason to believe that the sun will eventually win.