Economic resilience

The book contains 27 chapters, divided into five sections, where each chapter contains the edited versions of lectures delivered by Y V Reddy in different forums.

There has been a number of books written on the global financial crisis. Central banks, which played a key role in the crisis management, did not express their views due to obvious constraints. Central bankers not holding official positions are in a better position to throw light on the subject. Emerging markets have shown remarkable resilience during the crisis and are presently poised for respectable growth. Since the crisis originated in advanced economies, the views of the emerging markets, which bore its brunt, have not been articulated.

The author has had the insider’s view of the crisis, and was closely associated with several international initiatives to understand the crisis and identify the measures needed in response to a unique globally emerged perspective. The author has penned his scholarly views on the economic crisis which engulfed the world, and which he, being at the helm of affairs in India, ensured that India largely escaped the fate that affected the world’s largest economies.

The author discusses the causes of the crisis, the influence of ideas, institutions, interests, individuals and integrity. At the global level, the International Monetary Fund (IMF), which is responsible for the surveillance of economic and financial policies of countries, did not predict the crisis. Some governments in advanced countries contributed to the crisis by pursuit of relentless deregulation in the financial sector and failure of the state, market, governance, intellect and morality.

There is a sense of relief that a total collapse of the financial markets and deep depression have been avoided by timely initiatives at the national level, which were co-ordinated globally. Almost all countries experienced recession and almost all are in a state of recovery, although it is uneven and there is multiple speed recovery in different countries.

An impact of the crisis has been on the analytical framework governing economic management, which in most countries, proved to be less than adequate. India has undoubtedly emerged stronger and more resilient after the crisis. The author feels that the crisis happened before India went irrevocably in the direction of excesses in the financial sector. The book ends by discussing the challenges that are specific to policymakers in India, particularly the RBI.

It is argued that excessive stimulus in the form of additional expenditure and consumption in the government was undertaken in the past and it was partly driven by electoral compulsions. As against the unique challenges, India has some unique strengths: India has a large economy, the financial sector has exhibited strength and resilience, the policy instruments in place can be calibrated by the RBI depending upon the situation, and RBI has considerable credibility. It is therefore reasonable to expect that policymakers will successfully manage India’s economy during challenges.

 The book contains perspectives and analyses presented in a lucid style and non-technical language, written by one of the leading authorities on banking and finance. It will be of interest to students, researchers and professionals working in banking, finance and economics.