IN TROUBLED WATERS-LEGACY OF FINANCIAL CRISIS

By:

Nitin Kumar Nath, MBA(II Semester,IIIT-A)

A million dollar question "Are we finally out of downward spiral of crisis?" Indeed a debatable issues and the concerned population is equally divided on this. Bulls and bears must be fighting over this issue for some time and nobody seems to be in a comfortable zone.

With mixed cues doing rounds from every corner, the discussion seems to be going nowhere. The reason is simple. When to wash your hands from discomfort of Fiscal stimulus? How long to support exports and doling out tax breaks for business improvement? Constantly giving rise to budget deficit and Sensex being volatile due to huge selling pressure from FII's, thanks to uncertainty over US economic and unemployment data, the divestment plans of Government Of India are not a instant hit .The NTPC FPO has attracted only a lukewarm response and despite of French auctioning system being tried in India for the first time, the FII's performed a poor show and following this NMDC's FPO may have to suffer the same fate. These developments are giving sleepless nights to policy makers as Government tries to strike a balance between deficit and maintaining a healthy economic growth.

In wake of Chinese Central bank tightening its credit policy indicating tight lending regime, EU's economy growing modestly by 0.1% and the euro plunging to its lowest levels in last 7 months, the world economy seems to be in precarious situation. EU's major economies like Greece have not shown any remarkable growth rates. Recently RBI has modified its monetary policies to contain Inflation and suck out excess liquidity from the system with a silver lining that Index of Industrial Production i.e. IIP grew significantly prompting the hope of more than projected rate of growth this fiscal. All these factors are hindering flow of funds in the system and hence hampering the prospects of business growth. Retail sales in developed worlds data shows a significant leap last quarter but guidance for the next quarter has been lowered, therefore indicating possible demand slump in coming times. And recent announcement by Obama administration in US to pour in trillions of dollars for creation of new jobs have not boosted the market sentiments. Sluggish growth rate in all economies, except some emerging countries poses for bleak conditions, which may prevail for this fiscal as well.

All major financial markets fell sharply this week and contributing to the speculations that million miles have to be covered before we actually see the light of the day. Indian markets were up about 1 % but it remains to be seen which way they will move in the wake of recent developments.

With historical evidences of painful economic conditions in times of deleveraging, all emerging and developing economies are taking calibrated moves so as to ensure to establish their market stability and providing healthy prospects for investment. Therefore the market watchers are still ambivalent about where exactly the new economic order is headed and how long time it would take us to declare, "We are Out of troubled waters".