Dear Kuntal:
I apologise for this delayed response.
Thank you for thinking of me as important enough to ask me questions related to the crisis that we are seeing because of the financial related developments that have emanated out of the U.S.
I must admit that I am not astute in these matters but at the same time I have to say that I have been trying to read a lot of what is being written on how what happened in the U.S. has affected it, the world, including us.
I do not think that capital markets can run an economy. Capital markets are representative of capitalism which is good but, as we can now see, cannot be given too much liberty to do what it wants by lowering regulations to drastic levels. Secondly, regulators cannot say that they have been taken by surprise or that they did not have enough control. They are among the most intelligent people who know and understand money and they have enough powers to bring in policies which bring in control. I am saying this in the context of the U.S.
The U.S. seems to be attracting and doing more damage than doing good. It has been following the path of "excesses" and excesses are fuelled by greed. Being a wealthy nation and obviously having faith in methods which brought it that wealth also made its people and law providers go overboard. High standards of living, high wages, huge liberty to credit, easy finance to get more housing than one needs, slump in its manufacturing and services sectors, greater outsourcing, etc., etc., are all keywords that come to my mind when I think about what has happened.
The pillars of an economy I feel are manufacturing and the services sectors. How can nations keep these alive and vibrant in a scenario of great wealth is what I think as a great challenge.
There will be repurcussions on countries like India and China definitely and the signs of the effect I think are still early. However my calculation is that the crisis-ridden Western world is increasingly going to look at India and China for many things, and perhaps even at a greater amount of investments, for the simple reason that 1.2 and 1.3 billion people will have needs, needs will create a market and the market will provide for the needs.
Times however are going to be really tough in the Western world and will get tougher. Things are not going to be easy either in the emerging Asian economies.
The crux of what happened as well as the answers ahead can rest in two ideals is what I think: Greed is at the end of the day not good for anyone and for a nation. Second, one has to be very careful of the Means to an End.
These are some of my thoughts. I hope they make some sense!
Best wishes
Taarun Dalaya
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