Towards An Asian “Bretton Woods†for Restructuring of the Regional Financial Architecture

Despite a plethora of programs for increased financial co-operation in Asia, there has been very little real progress in developing a regional architecture for financial co-operation in Asia. While the risks of repetition of 1997-98 style financial crisis in Asia are not high today, there are new risks of financial turbulence originating from sub-prime crisis in the US and new opportunities for using the financial strength of the region for accelerated growth with equity. To guard against these risks and to exploit these opportunities, a bold new initiative in the region is needed. The idea of Asian Monetary Fund proposed by Japan in 1998 needs to be revived, perhaps with a different nomenclature and a different terms of reference. This paper proposes a Reserve Bank of Asia which will be a combination of IMF and the World Bank at regional level. In order to respond to the current crisis, the major players in the region should develop a consensus on the outline of a regional financial architecture and call a conference of EAS countries to prepare Articles of Agreement for the institution much as was done at Bretton Woods some sixty years ago.monetary, Crisis

On Managing Risks Facing the Indian Economy : Towards a Better Balance between Public and Private Sectors

While the global economy has pulled back from the financial abyss, it is by no means out of the woods. The developing countries (including India) should be prepared for : (a) medium term stagnation in their exports to the developed countries, (b) severe reduction in inflow of longer term capital from the developed countries, (c) a high degree of instability in short term capital flows and (d) instability in exchange rates with a serious risk of a dollar crisis. The impact on the Indian economy of these external factors may be more serious than is currently recognized in official documents. The conventional approach of assessing the impact of exports on growth and of external capital inflows on investment may be flawed. A large part of the recent (2003-07) increase in saving and investment rate and in growth rate in the Indian economy may have been due to external factors. And as the external stimulus provided by rapidly growing exports and cheap external credit during these years fizzles out, so could the recent acceleration in Indias GDP. In order to prevent such reversal in growth rates, increased efforts are necessary to : (a) generate domestic demand, in particular in unorganized sector where there is considerable underemployment and where additional demand can create its own additional supply, (b) mobilize domestic savings for longterm investment, (c) explore opportunities for greater South-South co-operation for trade and finance, (d) provide for protection from volatile capital flows and unstable exchange rates including a possible dollar crisis and (e) make an intensive study of financial risks of the corporate sector. If India is to achieve a steady growth of 8-9 per cent per year over the medium and long-term, it must look for a new balance between market and state and between North and South. In business as usual scenario, India may return to pre-bubble trend growth rates of about 6 per cent per year. On the other hand with appropriate reforms (quite different from those popular under the now defunct Washington Consensus) we can turn the crisis into an opportunity for maintaining rapid growth of 8-9 per cent per year and make it more sustainable and more inclusive.Indian Economy, exports, external stimulus, savings

Towards Comprehensive Economic Co-operation between India and Central Asian Republics

Despite some recovery in recent years, Central Asian Republics (CARs) remain in difficult economic situation and they present a serious challenge to Asia. It is in the mutual interest of both CARs and rest of Asia (including India) to explore the avenues for more intensive regional economic co-operation. This paper argues how India can be more active by : (a) giving intellectual confidence to CARs in developing and implementing their own Eurasian model of development which follows a middle path on both democracy and markets; (b) providing financial and technical resources to revive their agriculture , industry and services; and (c) improving connectivity and liberalizing trade and investment regimes for greater exchange of goods, services and capital.intellectual confidence, trade, Services