Is India insulated against the global economic upheavals or is our economy vulnerable too? Will the collapses on Wall Street affect Dala Street and will the Indian job market be affected?
To answer all these and more queries, we had economist Dr Amir Ullah Khan chat live with our viewers.
Amir Ullah Khan is a PhD in Economics and is Director at the India Development Foundation, a premier research institute. He is also a visiting faculty at the Indian School of Business, Bangalore Management Academy and Indian Institute of Foreign Trade where he teaches Economics.The transcript of the chat were as follows: nagupv:Hi , How these goverments will mopup the required money for bailed up progrems, Ultimately releasing more money into system ultimate decreses the value of money ( increse in inflation rate ). Please explain how this will absorb by the world.Amir Ullah Khan: You have answered your question. Any subsidy comes out of the tax payer. And comes back to roost....Harpreet Singh:Sir it was so nice talking with you, wishing you a success in your lifeAmir Ullah Khan: Thanks... wishing the same to youRakesh:Will india also face the housing crisis as that of US? How the property market will get affected in near term with 1-1.5 yrs view and how much correction do you expect in the housing prices in India.Amir Ullah Khan:We have far too few houses and commercial spaces. Real estate, regulated as it is with all sorts of ceiling issues, zoning laws, conversion problems, will not go down easily.Anand:It appears that even with the 700 billion bailout package being effected by the US government, investors are still wary and a worried lot. The maliase seems to have affected Europe as well. When such financial behemoths like Lehman Brothers in the US can go bankrupt suddenly, how well are our financial markets regulated and insured to weather this storm ?Amir Ullah Khan: Once confidence is shaken, bail outs rarely work. Our financial markets are so tightly regulated we have quite the opposite problem on our hands.
Puns:Demise of wall street seems certain. Though business will remain but not in strict 'wall street' fashion. Do you think Dalal Street can take place of Wall street, keeping in view the cartels of Indian Investment bankers around the globe ? Amir Ullah Khan: Why not... but for this our businesses will have to really scale up. Shan:Amir i would like to ask you wat would be the affects of this meltdown on oil, gold and steel in months to come? Amir Ullah Khan: At the moment, prices coming down rapidly.... Bharat Shah:What is the bottom level of the current market in terms of Sensex and the timeframe? Amir Ullah Khan: Cant play God, and even she will shudder at this question! Harpreet Singh:sir, i have read in newspapers that these big guns have fallen in usa bcoz of one principle followed" to big too fall"? why they have surpassed the norms? Amir Ullah Khan: Interesting that you ask this. This problem is more a philosophical one. It is indeed true that the mighty, who always believed in their invincibility owing to their size, have fallen really hard. In a couple of days on our Ramlila grounds, we will see some effigies coming down of exactly those who thought they were too big to fall. Bharat Shah:When do you expect the market to bottom out and what would be the corresponding sensex level? There are rumours that 7500 on Sensex is quite possible! Amir Ullah Khan: On the sensex, everything you hear is a rumour - whether it is 7500 or 50000. It is too much of a gamble for anyone to seriously predict the movement Shan:Amir wat would be affect of this meltdown on Oil, Gold and Steel in days to come? Amir Ullah Khan: Oil is already on its way down - at 92 dollars a barrel. So are gold and steel. Harpreet Singh:sir thanx for answering all these questions, one last go. how much our gdp will be affected? Amir Ullah Khan: No problems.. even if you have more questions. The GDP growth rate forecasts have already predicted that growth will be about 8 per cent this year. Can get worse, but this has little to do with Wall Street. It is our own inflation and the subsequent interest rate hikes that have brought the prospects of 9 per cent growth down Shan:What lesson do u think Indian Policy maker should seek from these crisis? Amir Ullah Khan: Careful, sensible and sensitive regulation. And the need for full and public information on the financial sector. Prashant:High inflation, rising cost of living in cities and the cascading effect on tier 2 cities as well, Private banks lending to one and all, skyrocketed property prices on one hand and on the other side, job insecurity, less hikes. Are we moving towards a Sub-prime in our country as well? Amir Ullah Khan: A sub prime in India is very very unlikely. We have such a housing shortage in the country that real estate prices rarely come crashing down, except temporarily in some cities. Our banks do chase prospects but dont give loans easily even now. Sub prime does not happen when property prices skyrocket! Kawaldeep Singh:Don't you think the rise of dalal street to 21K was overhype created by media and supported by manipulation by few of indias biggest corporate houses (biggest in indian stock market history even than harhad mehta and ketan parekh) for raising money by bluffing the common public? Amir Ullah Khan: I will not be as cynical. Our markets were doing really well in the beginning of 2008 and that got reflected in the sensex too. Also SEBI now ensures there is no repeat of the Harshad Mehta kind of scam. There could have been some manipulation, but there is no evidence for that yet. Ashutosh Khanna:I hear that the returnees from Us (who originally belonged to India) will face an uphill task in the job market? Will they take away our jobs? I work in the Hotel Management industry. Amir Ullah Khan: More people in the labour force in a growing economy is never a cause for concern. Also, returning Indians are far too few for us to worry about. Francis Gonsalves:How do you think is India going to be hit? We get scared for our families as even Europe is hit now, after America. Where does one hide? Amir Ullah Khan: Europe is bound to be hit. European bankers were the counterparties, for example, to most of AIG transactions Anwar Siddique:I believe,India will see now see more of Investments as the focus will be shifted from western economies,whats your say? Amir Ullah Khan: That has already started and is the reason we have seen investments come in even before this crisis. Now, we should see more action in India, but only if we really improve our infrastructure and our law and order situation uuuu:Do you agree with Chidambaram's stand that India is insulated from all the turmoil which has gripped the financial markets in US ? Amir Ullah Khan: Yes, I do. Our laziness in reforming the financial sector has actually helped us. luqman:sir,how much the global financial crisis will effect the jobholders in IT &banking sector ? Amir Ullah Khan: There will be problems, but it is extremely unlikely to affect job seekers in India Radha Rani:How real is the monster? How badly is our economy going to be hit? Amir Ullah Khan: If you are in the US, or in Europe with investements in holiday homes and risky sticks, the monster is huge. Our economy is doing fine. Prashant:One guys loss is another's gain. People are loosing billions, is someone gaining? Hopefully yes, then who? Thanks. Amir Ullah Khan: There were people gaining before the bubble burst. At the moment everyone involved is losing Radha Rani:Sir, when China is not worried, why are we? Amir Ullah Khan: China must be worried too, as it does have a greater exposure to th bond market in the US. Only bankers there do not have the freedom to express themselves like we do. balaji olety:Hi, I am into scientist and wish to continue my research in USA... I wanna know how will public funding to research be affected due to slowdown and bailout in US? And also whats ur forecast for currency exchange rates and bank fied deposit rates in the coming 12 months? Amir Ullah Khan: The US believes very firmly in pure sciences and the need for public spending on universities that do cutting edge work. So nothing to worry about there. And no self respecting economist woudl venture into the kind of forecasts you ask for. D N Sharma:Will India's march to becoming an economically strong country go on or will the Wall Street nightmare take away all our money too? Amir Ullah Khan: No, India's momentum is too strong at the moment. But maybe I am being just too patriotic. Shan:What do u think about wall of $ 700bn spilling over main street from wall street? Amir Ullah Khan: The 700 billion spend is a desparate measure. And the billion dollar question is, will it work? Kawaldeep Singh:Do we really have liquidity problem in India as it is in US ? Amir Ullah Khan: No, not at the moment. In fact we have excess liquidity Harpreet Singh:sir, can u please define global economic meltdown? Amir Ullah Khan: This is a vague term used by the doomsday predictors. Used to evoke great fear and awe. Prashant:Sir, IT companies are laying off people and joinings for freshers are delayed as well, this will have a cascading effect on the overall growth of the country. Moreover, layoffs on the pretext of low performance,relatively, is there a way out? Amir Ullah Khan: No way out for the moment. However you will notice that the number of jobs in all are not going down. Some firms certianly will hire less people. And those that are using poor performance as merely a facade are clearly not ethical - those who must lay off should give the real reason. Nishim:2009 will see many foreign banks gunning for banking license, with fall out of many major banks worldwide, what position should our regulators take. Amir Ullah Khan: Our regulators have always been careful, so much so that they actually overdo things. I hope they dont use this to clamp down completely. We need a lot more banks, many more branches and greater amount of money transactions to be financially inclusive Puns:How do you see future without wall street ? Amir Ullah Khan: Too early to declare the demise of the wall street. l.phanikrishna:HI why is indian economy mostly developed on US? Cant we have a separate One as US has? and why when US market falls india also shakes a bit? Amir Ullah Khan: This is a good question. The problem is that most of our policy making follows what goes on abroad. We have few institutions in India that can develop localised solutions. So we ape the west more often than we should. On the other question, the US is the world's biggest economy and our trade is dependent on our exports to the US and imports from there. That is why the contagion. We must diversify our trade and investment further K V RAMANA MURTY:What is the near future of recovering stock markets? Indian companies doing good, will the global economic crises influence? Amir Ullah Khan: I have no idea about the stock markets. And must say that any forecasts are fraught with danger Prashant:Sir, how is this global meltdown going to affect the job prospects in IT industry. How about the B-school placements especially in Finance sector? Thanks. Amir Ullah Khan: I must say that there will be an immediate hiatus. But by the time we have the placement season on.... sridhar:Hi Amir, what would be the impact on large indian corporations largely benifitting from global sourcing model? as the version goes there is a huge oppurtunity for india inc to crack major deals as corporations more seriously look at offshoring options. how far this makes sence? Amir Ullah Khan: It does make great sense. India's credibility is high these days. And if we stop the nonsense in Kashmir, Orissa and terror all around, we will do better. Sambit:Hi, I work for a MNC that is one of the biggest in the country. The revenue that it generates is mostly from US about 90% of its total income. What is more alarming is 80% of the business comes from BIFS (Banking, Insurance and Financial services)! What is the risk factor involved in continuing with such a setup and what impact this financial crisis could bear in the short run? Amir Ullah Khan: In the short run, there will be difficult times. But it in crisis times that skilled human resource becomes critical. So it is unlikely that India operations will get hit as much as operations in more vulnerable countries. Jobby Jigson:How much do you think India is going to affected by this economic slowdown?? Will this be an opportunity for India to be the superpower?? Amir Ullah Khan: It is really the US and Europe that are vulnerable. India and China can, in a perverse way, reap profits. But again, too early to say how the game will play out. Harpreet Singh:sir, whether our fundamentals are weak or we are just falling because our neighbours are falling? Amir Ullah Khan: Our fundamentals, thankfully, and I assume you mean India's, are really strong. The economy has been on a roll, well protected and severely regulated. vinay sharma:I have invested a huge amount in ICICIprudential schemes. Can I hold my money there? Amir Ullah Khan: No advise please. ICICI has managed difficult times in the past, but that is not enough information to say with any confidence that it will maintain its position. vinay sharma:How much UK economy is resistant with this currect situation? as they claim that they have enough liquidity. Amir Ullah Khan: At the moment they seem to be running scared. The UK financial sector is so closely connected to the US, it will be difficult for it to bear the heat. Nishim:Hi Amir, Do we see the CRR coming down further in near future Amir Ullah Khan: Its already down today morning. Once we again go on the growth path, high reserves will not be a good idea. But inflation is such a political bug bear, we really dont know when there will be a serious attempt at increasing liquidity. Mahesha:Hi What is your advise about ULIP scheme,i am thinking to swap from maximiser to low risk plan,pls let me know Amir Ullah Khan: Cant really give you advise here, except to say that ULIP continues to be protected by the Government which would not allow it to fail. However in turbulent times, low risk is awlays preferable. Harpreet Singh:sir, previously we were talking about decoupling and lots of analysts said sensex will touch 25k mark in diwali. i wanna know where those people are now? and according to you when we will again touch a 52 week high for sensex? Amir Ullah Khan: Your question has the answer. Next you will be looking for me if I stick my neck out and tell you when we will hit a high. Those who said 25k in January have all rightly disappeared.
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