Davos meet was a 'crude' shock

The annual World Economic Forum meeting at Davos attended by some of the most influential business and political leaders, has concluded at the Swiss skiing resort without an adequate gear to face the chill of the global slowdown, bordering on recession. As the top brains, including New York University Professor Nouriel Roubini, also known as ‘Dr Doom’, sought to figure out what has really gone wrong with the world economy, the fault lines were traced to China, the US and excessive crude gushing out of the oil wells with far less demand. Besides the usual suspects from the industry, the Indian delegation, led by Finance Minister Arun Jaitley and supported by RBI Governor Raghuram Rajan, worked overtime to hard sell the country as the “bright spot” and “sweet spot” among the global investors, who were managing somehow to chin-up despite the headwinds back home.

Whether India was able to make a mark at Davos, considered to be the ultimate summit of who’s who of the world whose opinion matters among the policy makers? On their part, both Jaitley and Rajan, did take pleasure in the fact that the Indian economy is poised to gain significantly from the emergent equation of crude selling at $30 a barrel with several positive spin-offs for the government’s finances and low inflation. But to their credit, they recognised some of the structural risks inherent in the economy, which need to be fixed rather sooner than later. So, even though Prime Minister Narendra Modi’s top economic minds, more so the finance minister, did flaunt India’s unique position as the fastest
growing economy in the world with 7.5 per cent plus expansion, they were careful to add caveats. These include the monsoon behaviour, fast deteriorating geo-political situation in West Asia and more of unpleasant news from China.

Rajan did some plain-speak about most of the central bankers, getting it wrong again in the developed world, trying to artificially pump up their fragile economies with unwarranted stimulus. Instead of going into hard and productive sources of economy, the ‘ultra-cheap money’ keeps blowing pressure into the balloon which could burst with serious consequences. The Indian financial sector, including the state-owned banks, have also been victims of the extra gas. Thankfully, the RBI chief relayed a clear message, reiterating commitment of the government to re-capitalise the PSU lenders who will have to tread, though on a difficult regulatory path for the next few quarters and clean up their books by March, 2017. India did project optimism at Davos, with a correct amount of caution.

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