The financial crisis bothers me. Why should it?
I have been asking myself that over the past few days. Is it the paucity of jobs once I graduate? Or is it hurting me financially? Or is it a very intelligent concern that I have for the world around me? Not really.
I think I figured it out.
Amidst rising oil prices during the Gulf War in 1991, India found itself in a balance-of-payments crisis and the prospect of defaulting on its loans. The IMF mandated a liberalization of the Indian economy; a coming out of sorts for what was a closed and to a certain extent, an unproductive economy.
I was two then.
Today, a liberalized India with fewer and fairer taxes, less regulation, a relatively smaller government is the second fastest growing economy in the world.
A liberalized India is all I ever knew.
After a couple of hundred years of British Imperialism, India in 1947, in its first Prime Minister’s words, “had made a tryst with destiny” and had won independence.
Instead it saw a post-war Europe and Japan reemerge from the debris. United States was well, the United States. They were calling it the boomer years. Even a lot of Asia followed.
India wasn’t communist. Nor was it comfortable enough with itself to embrace the free market. But give the Government a li’l leeway, it will kick open the door. Government grew bigger, corruption got endemic in its system and epidemic in proportions. As the world took the next leap forward, we found ourselves tucked in an ugly li’l corner that we had carved out for ourselves stagnating.
It was still waiting for its tryst with destiny.
In 1989, the wall finally fell. Literally.
Post-liberalization, it was India itself that India needed to conquer. Three hundred years stuck in an abyss, India was in the waiting room for so long that it had almost forgotten what it was waiting for.
Yes, India could build tall buildings, write the next generation of software, have its own breed privatized financial institutions and multinationals, raise money in Bombay like they did in New York and London, show long lingering kisses in movies, have jobs so that we could graduate out of college and not take the first flight out. And of course, beat Australia in cricket.
Never was private wealth and enterprise celebrated with such ferocity. It mattered that an Indian ran the biggest steel conglomerate in the world, and an Indian publicly- held company would one day drive home Jaguar from Ford.
They say we are in global financial meltdown.
The Bombay Sensitive Index, India’s equivalent to the Dow Industrial Average, has plummeted to 9,975 from a 52Wk High of 21,206.77. The Foreign Institutional Investors (FII’s), who happened to be more often than not the big banks that find themselves in a spot, have liquidated $ 9 billion worth holdings in India.
It is apparent that India will get hurt too.
World over, there is a growing call for more regulated markets and bigger government intervention.
Wasn’t Regulation what got India there in 1991? Wasn’t it the all-encompassing evil that kept India back as the world moved forward? Now they tell us to learn otherwise.
It is like getting up one morning and realizing that your neighbor is your actual father.
But a funny thing has happened. The years post-liberalization, even if kicked off by creative investors who couldn’t make returns big enough and the excessive liquidity that characterized all these years, India has somewhere realized that if a billion people get up every morning, brush their teeth and go to work, the economy would prevail.
But this financial crisis, unlike 1991, the IMF and the ‘ostensible’ free markets needn’t dictate anything. India has $300 Billion worth of foreign exchange lying around, and an economy that even by the most conservative estimate, will continue to grow at 6.5 %.
Things will get ugly. But wasn’t this where India wanted to be all along? The era of easy foreign liquidity might be over, but it is an India that finally could do without it. This is our tryst with destiny. And now that we have almost made it, let us not let it slip away.
The credit crisis hits India, but it may profit [The Economist- 10/14/2008]