ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles By Global financial crisis

Another Global Debt Crisis

When multiple crises confront global leaders, some yet-brewing ones tend to be ignored. One such is an(other) imminent external debt crisis in developing countries, which, as in the case of the COVID-19 crisis, is likely to be prolonged with long-term spillovers. However, while most observers admit that another external debt crisis is imminent, a commitment to find a lasting solution is absent. Not because the elements of such a solution are not obvious. With the COVID-19 pandemic and the Ukraine invasion having made this round of the debt crisis even more difficult to resolve, there is little option but to resort to a package that includes official debt write-offs, large private creditor haircuts and the channelling of cheap liquidity to less developed countries through mechanisms like enhanced Special Drawing Rights issues.

Export-induced Loss in Employment and Earnings during the First Year of the COVID-19 Pandemic

The COVID-19 pandemic has been an unprecedented exogenous shock in the world economy unlike the global financial crisis in 2008, which was endogenously determined in the structure of capitalist financial market. Given the fact that Indian export sector significantly contributes to the Indian economy in general and employment in particular, it is worth examining how the Indian gross domestic product and exports changed in comparison with the world GDP and world exports respectively, in the first year of the COVID-19 pandemic in 2020–21 vis-à-vis the GFC in 2008. Which industries are affected the most, in terms of export loss, during this COVID-19 crisis? What have been the consequences of these falling export on employment and earnings in the Indian export sector? This study estimates that in the COVID-19 year 2020–21, Indian exports have fallen by `3.74 lakh crore, with a plausible loss of direct employment by 5.06 lakh and an estimated loss of earnings around `12.4 thousand crore across 85 commodities.

 

Weak Note of Caution on Unconventional Monetary Policies

The prolonged deployment of “unconventional” monetary policy responses that began in reaction to the financial crisis of 2008, especially “quantitative easing,” set off speculative investments and fuelled asset bubbles. Since they cannot allow the new bubbles to give in, policymakers must persist with decisions that inflate asset prices. By doing so, they end up sitting one more bubble on the previous one. The probability that one or both may burst has only increased.

Public Sector Bank Mergers

The slowdown in the economy and the resultant rise in bad loans have led to criticism of public sector banks and questioning of their raison d’être. While there is a rush to find a quick solution by merging PSBs, it would be wise to examine the ground realities closely. India needs a mix of efficiently run PSBs and aggressive private banks to achieve growth and development along with social justice.