US Dollar – Losing Hegemony?

With the world’s largest economy in the doldrums, soaring unemployment and ballooning deficit, immense pressure has been put on the greenback. The world’s reserve currency is on trembling ground, as most central banks are looking for alternatives.

A flood of greenbacks from the Federal Reserve and the Obama government may be necessary to prop up the ailing economy. He suggests that the US government must control its unprecedented levels of debt in the future or risk the consequences.

Printing too much

Part of the dollar crisis can be attributed to the Fed’s new monetary policy, under which it lent money to the member banks in the US virtually at 0% interest. This in turn enabled these banks indulge in dollar carry trade to invest in high performing economies in Latin America and Asia. The rate of return is much higher in these nations than in the US. Besides, the sharp decline in dollar value has also been due to diversification on the part of central banks (which currently hold around 90% of their foreign reserves in the dollar) from dollar to gold, euro and yen.

As the US economy looks very weak at present, it makes sense for nations to diversify out of the greenback. For instance, the Reserve Bank of India recently used $6.7 bn from its reserves to buy gold. The feeble consumer spending, rising unemployment and enduring worries about the fragile banking system in the US, have also hit the greenback adversely. Peter Schiff, President and Chief Global Strategist of Euro Pacific Capital, reckons that the dollar is on a long-term downward trajectory and that it could collapse if the US government continues with its current policies.

Whither dollar?

Experts say that a persistently weak currency is a sign of economic imbalance in terms of lack of competitiveness or overconsumption, arising usually from excessive supply of money and credit. Thus, since the dollar is the world’s reserve currency, its collapse will have massive ramifications around the world. Amid weaker US economic growth, relentless trade deficit, and surging commodity prices, the era of the strong and overvalued dollar is over. A weaker dollar makes it easier for foreign investors to acquire key assets in the US, which is only one side of the problem. 

On the other hand, a dollar crash will have disastrous implications for the world economy and financial markets. The greenback has tremendous influence throughout the world because many central banks (e.g. China’s) have pegged their currency to the dollar. Addison Wiggin, Editorial Director, The Daily Reckoning, opines, “Many exporting countries are seeing their currencies going up in value, making it indefensible to continue exporting at the same rates as in the past. So we have, through trillions of dollars of debt accumulation, created a de facto dollar standard in much of the world economy.” Analysts suggest that in order to keep the global economy on the right track, the US policy makers must first fix the dollar, as it is the single most important price in the world for its value, influencing prices and investments on a global scale. Therefore, with a weak dollar, global economic recovery might not be as broad as publicized. Since it is the world’s major reserve currency and a major trade settlement currency, the stability of the greenback has a key influence on the stability of the global economic recovery. It has been at the heart of the global financial markets for well over half a century, and if its demise is not smooth, it could lead to an era of competitive devolutions and other trade policies.

Conclusion 

In a very short span of time, the world’s biggest lender has become its biggest borrower, a situation that Uncle Sam has made no serious attempts to change. It is worth remembering Washington’s standard take on this shift: “The dollar is our currency, but it’s your problem.

N Janardhan Rao,  Senior Economist.

India and China – Driving Global Growth

Let’s welcome the new confidence to pave the way for emerging economic powerhouses. The positive factors that are driving these economies will help accelerate growth in the coming decades.

“The likely emergence of China and India as new major global players—similar to the rise of Germany in the 19th century and the United States in the early 20th century—will transform the geopolitical landscape, with impacts potentially as dramatic as those of the previous two centuries. In the same way that commentators refer to the 1900s as the “American Century”, the early 21st century may be seen as the time when some in the developing world, led by China and India, come into their own.”

– Mapping the Global Future: Report of the National Intelligence Council’s 2020 Project, US.

The global economy is undergoing a transformation which occurs once in a century or two. The 19th century belonged to Britain, the 20th century was of the US and the 21st century will belong to China and India, the world’s two most populous countries and their growth pattern is set to be the most dramatic event of the century. In the past, both the countries have had a big influence on the world economy in the early 19th century. In 1820, China was estimated to have accounted for around 29% of global GDP, and India for 16%. Now, these Asian economic giants are re-entering the world economy with some positive legacies. There are greater similarities in their policies against the economic cycles of repression and reform. Accordingly, both the countries liberalized their economies and witnessed greater economic growth over the years.

According to a US intelligence report—Mapping the Global Future, “the rise of China and India as global players is heralding an Asian Century in place of a receding American Century”. According to economists, a combination of sustained high economic growth, expanding military capabilities, active promotion of high technologies, and large populations will be at the root of the expected rapid rise in economic and political power for both the countries. Markets across the globe are also trying to digest recent investment bank reports arguing that China and India will become the world’s second- and third-biggest economies sooner, rather than later. In the age of globalization, size matters more than ever; the bigger the economy, the more long-term investment it seems to attract.

There are quite a few similarities between both. They are most populous and have a reputable history. China close linked with India by adoption and transformation of Buddhism in the 10th century itself, besides, the Chinese Indian civilization in architecture and temple-building, sculpture and painting and creative arts. On the economic front too, there are a number of similarities between the two Asian giants. Both of them were the world’s richest and leading economies at one time, and suffered economic recession in the second-half of the second millennium; and then witnessed their progress to modernity in the middle of the 20th century.

Until 1981, there was not much of difference in their economic performances. With 26 years of reform in China and a little more than a decade in India, both the governments avoided economic recessions. They enjoy huge foreign exchange reserves and growing exports of goods and services. While China has made great strides on the manufacturing front and achieved global competitive advantage in a variety of industries, India has emerged as the world’s software and information technology hub. India’s success especially in software has gained visibility amongst the developed nations. The growth of these two Asian economic majors is outlining not only the Asian but also world economy as a whole. In many ways, China and India are fueling each other’s growth by adopting the best practices each learned from the other. For instance, India has been the leading destination for inward foreign investment in research and development among developing countries, while China has had tremendous success in attracting foreign direct investment in export-oriented manufacturing Special Economic Zones. Thus, China has mimicked India’s approach in developing pure R&D capabilities, while India has begun to look at developing Special Economic Zones to capitalize on translating R&D capability into productive capacity. They can complement each other. Through comparative advantage, the countries can take advantage of each other’s existing strengths.

To their credit, both countries account for 40% of the world’s population and are the fastest growing major economies in the world. Their economic growth figures arrested the attention of the world. In terms of Purchasing Power Parity (PPP), China is the second largest economy after the US, followed by Japan and India. Going by their current growth rates, according to the US National Intelligence Council, China will be the largest economy in the world within a decade and India the world’s third largest by 2010. Besides, these two economic powers will be major driving forces for stimulating world economic growth in the next 25 years and beyond.

Comparative Perspective

Compared to China, India really has a long way to go. China has a more coherent leadership, is more business-friendly and has a much stronger international profile, and so it will vault ahead. India has world-class intellectual skills and the advantage of English fluency but needs to simplify its business environment. India relies too much on the skills of individuals whereas China relies on its ability to organize skilled labor to build up enterprises and invest capital. As things stand today, China is way ahead of India in terms of presence in the global marketplace. For example, China’s share of world exports is nearly seven times that of India’s. The discrepancy in terms of FDI volume received is also substantial, even after leaving a wide margin for potential exaggeration in the numbers reported by China. In terms of economic potential and global aspirations, however, China and India are both giants. Each has a considerable pool of resources at its disposal, which, if harnessed and channeled appropriately, could be used to realize their true potential.

To date, each country has followed a different path to propel its economic growth. In each case, the pace of economic progress has been divergent and the pitfalls associated with each strategy are also not similar. India’s experience with economic liberalization is more recent than China’s; it is more prone to political roadblocks. India’s is still a relatively insulated economy compared to China’s, which has already shown a remarkable ability to integrate itself into the global economic marketplace. It is important to note that simply having an economy that is valued at a trillion dollars does not equate with general prosperity. Both countries have critical milestones that need to be reached in the form of enhancing productivity, transparency, participation by many, financial-savvy etc., before they can credibly be incorporated into the club of prosperous nations. Dr. Linda Yueh, Economist, London School of Economics is optimistic about India’s prospects as it shares many of the features of the Chinese economy. Both countries have large population, mostly rural with urban centers of industry, a commitment to education even if only a portion of the population possesses high levels of human capital. But, perhaps, most importantly, both countries share a focus on the importance of science, technology and promotion of industries, which incorporate advanced skills.

The New World Order

After the border war in 1962 and a long period of disbelief in each other, they are now moving towards a more economic cooperation regime. They are coming closer and recognizing their common interest in trade, commerce and regional stability. In the year 2004, bilateral trade stood at $13 billion, contributing 1% of China’s global trade and India’s 9%. Indian companies are taking lessons from China’s manufacturing prowess while Chinese IT companies are learning from its neighbor, an IT giant. Experts say that these developments will have significant global implications, going by the vast economic potential of both the countries and their eager desire for energy and other natural resources. Besides, cooperation between these two Asian nations may reshape the global balance of power in the 21st century. The countries’ rapidly growing economic presence is transforming the traditional economic order, says Zhang Jun, Professor of Economics and Director, China Center for Economic Studies, Fudan University. “Both India and China are set to emerge as significant global economic powers in the first half of the 21st century—China is most likely to do so by 2020 and India more likely to achieve this status around 2030. Both countries will be significant regional powers in Asia”. Once they achieve the status of global economic powers, they will compete with the US for global economic supremacy.

Challenges

However, being most populous nations, both have one common challenge—the creation of a large number of new jobs every year to match the unfold labour market every day. Experts say “if that challenge is not met, social unrest may start and, if so, the established political leadership will feel the ground slip from under their feet. This may be more acute and visible in China, albeit still characteristic of the situation in India. The governments of both the countries need to justify their grip on power by creating employment and the indispensable condition for economic growth”. According to Gordon G Chang, Author, Coming Collapse of China, China’s ailing state sector has shed workers by the tens of millions in the last decade. That threatens social stability. Massive non-performing loans threaten the state banks, which are hopelessly insolvent. Reform is making the problems worse, and China could face a financial crisis in the next half decade.

Though India has a great potential, a lot still needs to be done. India is a potential global economic power. But for that potential to be realized, its promise must not be treated as an instrument of short-term electoral popularity. India, being an agrarian economy, the performance of the agricultural sector is very important not only from the point of view of economic growth but also from the viewpoint of the well-being of the majority of the population. The sector that provides 60% of employment is virtually stagnant and its development has been systematically ignored both by the central as well as the state governments. Besides, the biggest challenge is to raise the per capita and standard of living of these people.

Going Forward

The journey of both the countries towards becoming economic powerhouses has just started and is gathering momentum. They have been steaming ahead, marching much better in terms of growth than their counterparts. There is every hope that the present challenges of both the countries will be tackled successfully in the years to come. A new equation is beginning to emerge in the Sino-Indian relationship.

It is no longer the competition but the cooperation that is going to drive the two Asian neighbors’ rise to prominence as the global economic powerhouses. That will mean a great reshuffle in the global economic order. Echoes by Professor J. Orstrom Moller, Copenhagen Business School “In the next decade or two, China and India will create an economic powerhouse of unprecedented magnitude and effectiveness. World politics and world economics will be forced to adjust with a speed and to a degree not seen before in human history. With 2.2 billion people, a fast growing middle class, rising purchasing power, confident political leadership and competitive world class enterprises, these two countries will dominate the world economy”.

N Janardhan Rao,  Senior Economist.

Urbanization: An Overview

“The growth of cities will be the single largest influence on development in the 21st century.”

– United Nations

Urbanization is a phenomenon that is gaining momentum across the world, today. The trend, which is fueled by the twin factors of urban population growth and migration from rural to urban areas, however, is not bad and in fact, often benefits the economic growth of cities and its surrounding areas. But on the flip side, it poses huge challenges as it exposes poor infrastructure facilities of urban centers which have not kept up with the rise in urbanization and lack of effective policy planning on part of the governments, both at the local and at the central level.

In 1800, only 2 per cent of the world’s population lived in urban areas, although the history of cities is as old as the 3rd millennium B.C., according to the United Nations. The number now has grown manifold to 3 billions and, in 2007, it crossed another milestone: more than half of the world’s population is urban. And if the pace of urbanization (the World Bank defines urbanization as a process of relative growth in a country’s urban population accompanied by an even faster increase in the economic, political, and cultural importance of cities relative to rural areas) continues its momentum, by 2050, nearly 2/3rd of us would be living in cities.

According to estimates by the United Nations, by 2008, more than half of the world’s current 6.7 billion population will live in cities; by 2030, the urban population will have risen to 5 billion, i.e., 60 per cent of the world’s total population. Further, in 2005, China, India and the US had the largest number of urban dwellers in the world.

What is causing the sudden burst in urban population? Migration from rural areas to urban centers and growing population are the two major factors behind rapid urbanization witnessed across the globe, including India. In fact, the trend is going to be stronger in India, in particular, and the whole of Asia-Pacific, in general, if the forecasters are to be believed. The process of rural migration has accelerated in recent times with agriculture’s diminishing role in employment generation and growing economic activities in cities.

Contrary to common perception, urbanization is not a side effect of economic growth; rather, it is an integral part of the process, suggests a World Bank report. According to it, India’s urban areas make a major contribution to the country’s economy. For instance, though less than 1/3rd of India’s people live in urban areas, they account for over 2/3rd of the country’s GDP and 90% of the government revenues. However, the rising trend of urbanization poses a significant challenge to the country’s cities.

While the cities have been expanding to catch up with the spurt in migration and also population, it has not been matched with the creation of basic amenities like housing, water, transportation and sanitation among others. Lack of availability of shelter has, in fact, emerged as the biggest issue facing the Indian cities, today. According to the WB, slums now account for 1/4 of all urban housing; in Mumbai, which has the distinction of having Asia’s biggest slum, more than half the population live in slums.

Rapid urbanization also means increased pressure on the cities’ already choking infrastructure like roads, sanitation, water, healthcare etc. It is no secret that our cities have not been able to cope with the sudden burst in urbanization, a trend which has been gaining momentum. Major metropolises like Mumbai and Delhi have been struggling to provide basic services to their denizens. Jammed roads, rising levels of pollution, lack of affordable housing, erratic power supply, lack of access to drinking water etc. have been the nagging issues facing these mega cities in-the-making. Offering effective and affordable citizen services is another major challenge before the government and policymakers. Added to the list of woes is the issue of rising urban poverty.

Cities lack the vision and proper policy initiatives and also funds to effectively deal with the challenges arising out of rapid urbanization. However, given that the trend of urbanization is irreversible, there needs to be concerted efforts on the part of the policymakers and urban planners to come out with better solutions.

Defining Urbanization

In today’s context, the definition of an urban area differs from region to region and from country to country. However, on an average, demographers define that cities are large, densely populated, built-up areas. However, the most accepted criterion of urbanization is typically population size, population density, and the extent of the built-up area. For instance, in the US, census regard urban areas as those with at least 2,500 people, but in the UK the figure is 1,000. Accordingly, the definition of an urban area changes from country to country and there are no uniform standards.

Most commonly, a city is generally defined as a political unit organized and governed by an administrative body. This unit is a symbol of defining a city or an urban area by the number of residents. According to the United Nations, an urban area contains residents of over 20,000, and a city contains more than 100,000. The US defines an urbanized area as a city and surrounding area with a minimum population of 50,000. A metropolitan area contains both urban and rural area, which is socially and economically integrated with a particular city.  Megacities contain over 5 million inhabitants and there were 41 megacities in the year 2000 and the number is expected to grow expected to grow as population increases in the next few decades. By 2015, the figure may go up to 50 megacities and 23 of these are expected to have over 10 million people.

There are many reasons for the growth in numbers of cities. The large pool of urban habitants benefits the agglomeration or clustering, of related activities, which saves time and money. Moreover, cities are linked to other cities by transport network to access goods and services.

The Process of Urbanization

The practice of urbanization occurred differently in developing and developed countries and historically many of these countries were former colonies. It happened due to the population growth rates and countries with highest growth rates have the largest urban areas. The developing counties are characterized by poor, rapid migration from rural to urban area and having significantly less technology than the developed world. For instance, in the US migration from rural to urban was facilitated by large-scale industrialization to fulfill labor requirements. In the developing countries, urban migration takes place without any industrialization and employment opportunities for the masses leading to a great deal of pressure on urban areas. That is why many cities in poor countries contain large unemployed people living in poverty and in unsanitary squatter settlements.

Today, the degree of urbanization varies across the globe and this in general reflects the wealth of individual countries. The developed and industrialized nations tend to be the most highly urbanized.

In 20th century, one of the remarkable characteristics of urban growth has been the rapid increase of small cities to very big ones. During the 18th century, there was hardly any city with more than a million inhabitants. However, after it the number of cities has risen steadily and in the 19th century there were at least 13 cities with more than a million inhabitants, and by 1950 the number had grown to 68. Today, there are around 250 cities of more than a million habitants and many of these are in Asia, particularly in India and China.

Factors Driving Urbanization

A World Bank report suggests contrary to common perception. Urbanization is not a side effect of economic growth; rather, it is an integral part of the process. It further says that India’s urban areas make a major contribution to the country’s economy. For instance, though less than 1/3rd of India’s people live in urban areas, they account for over 2/3rd of the country’s GDP and 90% of the government revenues. However, the rising trend of urbanization poses significant challenge to the country’s cities.

Urbanization in India – On the Rise

According to a report by the United Nations Population Fund (UNFPA), India is getting urbanized at a faster rate than the rest of the world and, by 2030, 40.7% of the country’s population will be living in urban areas. With growing job opportunities and increasing salaries, states like Tamil Nadu and Maharashtra are witnessing rapid urbanization against the least urbanized states like Bihar and Assam. UNFPA opposes the idea that rural migration is driving urbanization in India. It says that urbanization is happening more due to the natural rate of population growth than increased migration. The report says that among the factors that are adding to rapid urbanization is natural increase in the urban area, which is contributing 61% while 22% to, rural to urban migration and another 17% to reclassification of rural areas as urban. To its credit, India’s urban population is the second largest in the world and is higher than the total urban population of US and Russia put together, excluding China. In terms of population, Mumbai ranks fifth and Delhi is the sixth largest and Kolkata is the 12th among the world’s top ten cities.

The Challenges

The rapid urbanization is creating numerous slums in the industrializing world, around 900 million slum inhabitants the world over, whose surface is splattered with fetid fluids and littered with plastic bags. The situation is worst especially in Africa, Latin America, Asia and in many parts of the Middle East. According to a study done by the United Nations Human Settlements Program (UN-Habitat) titled “The Challenge of Slums: Global Report on Human Settlements” urban slums are growing faster than expected. It says “With the locus of global poverty shifting rapidly from rural areas to cities, almost one sixth of the world’s population is already living in unhealthy areas, more often than not without water, sanitation or security.” The report warns that if no concerted action is taken, the number of slum-dwellers worldwide will rise to two billion over the next thirty years.

Despite these concerns, the number of people moving to cities is growing rapidly which is resulting in the huge increase in the world’s urban and urban slum populations. This is a crisis of unprecedented magnitude. The rapidly growing cities are caught in a deep morass of haphazard growth and unplanned development of infrastructure making these cities unable to cope with the increasing burden of population. The people who are living in slum are yet to be provided with shelter, employment along with other urban services. “The stretched capacity of most urban economies in developing countries is unable to meet more than a fraction of these needs,” says Naison Mutizwa-Mangiza, Chief of the Policy Analysis, Synthesis and Dialogue Branch at the UN-HABITAT Monitoring and Research Division.

Against the growing migration from rural to urban areas, there are possible outcomes of slums, salvage yards, or ruins. So, the biggest concern of growing cities is to ensure and to upgrade the slums significantly by investing in infrastructure. Mutizwa-Mangiza suggests “Experience has shown the need for significant investment in citywide trunk infrastructure by the public sector if housing in upgraded slums is to be affordable to the urban poor and if efforts to support the informal enterprises run by poor slum dwellers are to be successful.”

Statistics reveal that the world is now more urban than rural and especially for developing countries, the going seems tough and the coming years will be an acid test for countries seeking slum development. For effective urban planning Jeffrey D Sachs, Director, Earth Institute, Columbia University suggests, “the world’s cities will have to succeed on three policy dimensions to ensure all citizens have adequate living conditions as follows:

• Urban planning by build adequate infrastructure, such as roads, houses, electricity, water and sanitation services, public transportation, schools and health clinics;

• Urban development strategy, through tailoring their goals to their circumstances of their own regions to transform slums into legitimate communities; and

• Strengthen urban governance to improve the lives of poor people and promote equity.”

If urban policymakers ensure the above conditions, the spread of urbanization will be an enormously beneficial. In fact, people in urban area are much more economically productive and they have been a wellspring of innovation for many new ideas. The process of globalization and the death of boundaries increased the returns for being smart, and even one becomes smart by associating with smart people. Therefore, cities are important forever as they create the intellectual connections that forge human capital and spur innovation. The problems like poverty, pollution, and disease, are not because of growing urbanization but lack of proper vision in planning and governing cities of policymakers.

Outlook

Across the globe, cities are struggling with huge outward migration of people and related problems. On the other hand, public authorities have once again tried to slow or halt the process but they have been failing in their effort to stop people from moving into the cities. It is difficult to predict what the next chapter history of urbanization will bring. However, there are lessons to draw from what has happened to date.

N Janardhan Rao,  Senior Economist.

Asian Economies: Emerging Global Leaders

Over the last couple of decades, Asia has become a key player in the global economy and today the region’s continued dynamism may be ascribed to the role played by China and India with earthquake hit-Japan lagging somewhat behind.

 A closer look at the key numbers suggests that the rise of Asia is no myth. Asian stock markets make up 35% of global market capitalization which is much ahead of America (33%) and Europe (27%). Similarly, central banks hold two-thirds of all foreign-exchange reserves.

In terms of Purchasing-Power Parity (PPP), Asia’s share of world economy has risen more progressively, from 27% in 1995 to 34% in 2009 and is expected to cross 50% in 2011. Asia accounts for one-third of world retail sales and has now emerged as the biggest market for many products, accounting 35% of all car sales and 43% of mobile phones. At these growth rates, reports indicate that Asian economies will probably exceed the combined sum of the US and Europe within four years.  Based on current trends, the gross domestic product of Asian economies will exceed that of G7 nations and will be half the size of the G20, 20 years from now.

Unbelievable Trends

Amidst rising Asia’s leadership opportunities, the weight of the world’s economic activity is shifting from G7 countries toward emerging powers in Asia and Latin America. In the coming decades, the trend is expected to accelerate as Asia will be the heart of the new global economic order as China and India evolve. Economists expect Asia to rise to the challenge and play a more prominent role in the changing economic landscape. Donald Tsang, Chief Executive of the Hong Kong Special Administrative Region says, “Asian economies, by working together, can lay a solid foundation for sustainable economic development and play a more prominent role in the changing economic landscape.

This way Asia can play a more constructive role in reengineering and reshaping the global financial architecture.” Echoed by the Organisation for Economic Cooperation and Development (OECD), developing nations, including India will account for 60% of the global output on purchasing power parity by 2030 going by rapid economic growth and increasing domestic consumption. Economists say Asia’s emerging role is not a single standalone event, but the sign of an important structural transformation in the global economy. Based on the flourishing economic policies, the region will continue to play a key role in both global economic growth and the design of policies to deal with challenges in the post-crisis era.

Challenges

Nevertheless, the region’s rapid growth will no way continue automatically and it still needs to build robust policies to address the challenges it faces both in the short and the long-term. There are significant macroeconomic risks beyond just regular measures of government’s fiscal policies. It has significant long-term development needs, including infrastructure and education. To continue private domestic demand, Asian economies must nurture thorough policy measures which will vary from country to country as some will need to increase consumption, sustain and increase investment especially in infrastructure while others must need to boost productivity in the service sector.

Managing growing capital flows is another challenge as economists say surging capital flows will need to be carefully managed to avert overheating in some economies and to prevent an increase in those countries’ vulnerability to credit and asset price cycles and macroeconomic volatility. To sustain the growth tempo, Asian economies need to replace the sluggish demand from advanced economies as their demand remains below pre-crisis levels. Weaker demand in advanced economies would disorder Asia’s export markets.

Although Asian countries have made tremendous progress in poverty reduction, still a high proportion of the world’s poor live still in the region. According to World Bank estimates 2010, 17% of the people in the East Asian and Pacific countries and 40% of the people in South Asia are living in poverty as a result of the global financial crisis. Asian economies are still struggling to move from agriculture to manufacturing as a basis for long-term growth.

Global Engines of Growth

Without doubt, Asia has been one of the key engines of the worldwide rebound. The rapid economic growth of emerging economies has resulted in a global economic power shift. Asia is experiencing potentially a historic movement, a crusade of transformation. However, it is not going to be easy for the Asian economies as the outlook for the global economy and sovereign credit is at a critical and uncertain juncture. Asia’s future economic resilience rests on the economies capability to shift away from export-driven markets.

Economists remain cautiously optimistic about the pace of global recovery and foresee dangers ahead. According to Olivier Blanchard, Chief Economist, IMF: the recovery depends “How Europe deals with fiscal and financial problems, how advanced countries proceed with fiscal consolidation, and how emerging market countries rebalance their economies, will determine the outcome.” Going forward, Asia has a crucial role to play and by working together they will find the way to sustain economic success not only for the region but for the world economy as well.

N Janardhan Rao, Senior Economist.