a paradigm shift..!

The global meltdown has put an end to growth model based on consumption as in the case of America and one that is entirely driven by exports as in China. The culture of excessive consumption in western contries due to easy availability of credit has resulted in low private savings rate. The problem is not too different at the government level as the US has been running a deficit budget for last few years. This mess in the financial system could have led to another crisis,had it not been for the cheap capital provided by developing countries, manly china in the form of deposits in the US treasury.
Now,this dual core engine of world growth based on consumption and exports has failed miserably. It should be seen as an opportunity to develop an alternate model based on high savings rate and a strong R&D culture resulting in the production of goods with high value addition instead of spending money on unproductive activities.
Moreover,the curbs on the flow of capital should be removed so that capital could finds its way to the country where the returns are maximum ,thus homogenising global growth in a fairly equitable manner.

keynesian economics.

Thw world economy has tumbled upon yet another recession in less than 6 years. The downslide which started in the US in dec ,07 has spread to several countries of Europe and Japan. The emerging economies of China and India have also been impacted for no fault of theirs. It has resulted in loss of jobs in almost all industry verticals due to weakening of aggregate demand. It is expected that situations will improve by the end of this year with the return of normalcy in the growth rates.
Pessimists have compared it with spectre of early thirties,predicting a decade of stagnant growth. However, such a scenario is highly improbable given the magnitude of efforts by the central banks all over the world to contain the fallout of this recession. We may see huge increase in public spending in an attempt by world governments to provide counter cyclical measures as prescribed by Keynes. However,such efforts need to be coordinated across the globe to create huge multiplier effects to enable the world economy to get out of this recession.
This crisis has led to scathing attack on the ideals of capitalism ,raising of question regarding the ability of the system to ensure holistic development of our economy. However,in the absence of any viable alternative,we may continue to follow the capitalistic model of development which has resulted in rapid economic development of western world inspite of its shortcomings. However, recessions have got some clensing effects as they help us to get rid of our past excesses reminding us that life is not full of rosses.

satyam saga

The stunning revelation by satyam about incidence of cooked up data in its balance sheets has taken each proud indian by surprise.This has reignited the importance of ethics in corporate governance. Moreover,This fiasco has brought shame to IT industry of india and may adversely impact the credibility of statements regarding the performance of indian companies. Foreign instutional investors may get discouraged from investing in india at least in short term. This story has compounded the misery of the indians having already suffered from the recent global meltdown.
Any listed company is supposed to follow corporate governance of highest standards as most of the capital comes from general shareholders other than promoters. Its the faith of the people in corporate governance that makes the system of equity finance possible. This episode may drive common men to stay away from capital markets. However, all is not lost. This problem may be seen as an oppertunity to make the provisions of corporate governance with no loopholes. We can only hope that such incidents dont get repeated in the future.