By Pradeep S Mehta and Siddhartha Mitra
LARGE business houses have indulged in knee-jerk reactions to the financial meltdown in anticipation of a recession in demand and credit. A freeze on new employment and business expansion seems imminent. However, Indian big business is underestimating the strength of the Indian economy — its vastness and diversity which can provide both the necessary demand and supply stimulus for growth. All that is needed is that all economic agents — the government, consumers, investors and entrepreneurs — maintain a positive attitude in going about business as usual.
Therefore, the current freeze being advocated is definitely the wrong way to go about things. The Indian economy is certainly capable of breezing through the global financial meltdown at only a slightly reduced rate of economic growth of 6-7% per annum. But for that to be possible big business will have to continue spending, earning and employing without inhibitions.
However, the efforts of big business alone might not be sufficient for ensuring that India coasts through the global meltdown. There is a need for support from all the other economic actors: government, consumers, investors and depositors.
For the government, this is the time to plan and execute infrastructure projects and employment programmes which can generate jobs and enhance productivity. Investors need to not only keep themselves invested in firms with sound fundamentals but to pick up undervalued blue chips offered by the depressed stock market. Depositors need to be proactive in checking rumour mongering about bank failures and play an active part in the formation of reliable information networks.
The authors are Secretary-General and Director (Research), CUTS International and can be reached at psm@cuts.org and sm2@cuts.org respectively.