Economist Omkar Goswami writes:
- “On the last Friday of 2007, the BSE Sensex closed at 20207. That evening, at a swish Mumbai restaurant called Indigo, a young investor banker triumphantly told me, “20,000 is just a half-way house to 40,000, which will happen sooner than you think.” On
26 December 2008, also the last Friday of the year, the Sensex closed at 9,329 — almost 54 per cent below the level a year earlier. Instead of doubling to 40,000, it had more than halved; and quicker than the young banker could have thought.
- Only traitors questioned the sustainability of our dazzling growth trajectory. “What’s 9 per cent?” you were told with barely hidden contempt. “Why shouldn’t we get 10 per cent? Or 11? Or even 12?” Today, these self-same alpha males speak of cutting investments, slashing costs, conserving cash and ‘right-sizing’ — the euphemism for firing people.
- There is nothing to indicate that
has learnt the lessons of 10 years of inaction. Japan
- There are solutions. The immediate ones are monetary. Why can’t the cash reserve ratio be brought down from 5.5 per cent to 2 per cent? Or even zero? Why should banks earn 5.5 per cent by parking their money at the RBI? Why shouldn’t this reverse repo rate be slashed to 2 per cent? And the repo to 4 per cent? These measures will create more liquidity and force the banks to lend. To put a lid on monetary expansion because of inflationary fears is absurd in a situation where commodity prices have crashed everywhere.
- Plan to ride out 2009 by gritting your teeth and working harder than before. Things should turn for the better by January-March 2010”.