The Hindu : Tamil Nadu / Chennai News : “Recession will help India tap capital flow to strengthen economy”

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Friday, Jan 09, 2009
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Tamil Nadu

Tamil Nadu - Chennai

“Recession will help India tap capital flow to strengthen economy”

Special Correspondent

CHENNAI: The global recession provides India with an inflection point to leverage its position as a relatively safe investment destination and tap the inflow of capital for strengthening the domestic economy, fast-tracking key infrastructure projects and combining strategic intent with commitment to long-term goals, management guru C. K. Prahalad said on Thursday.

Addressing a plenary session on ‘Reflections on Current Economic Crisis --Diaspora Concerns’ at the Pravasi Bharatiya Divas convention, he said the global economic crisis placed India in a unique position that allowed it to project itself as a safer investment destination buffeted from toxic papers and fudged balance sheets. However, the general disenchantment with free economies should not become a negation of globalisation. He asserted that globalisation was here to stay, and India should open itself up to growth-oriented investments in roads, ports and power.

He cited the adoption of regulation as a supervisory framework that was stringent, yet did not stifle innovation, greater transparency in the functioning of regulatory bodies and clarity of purpose in envisioning the future and commitment to long-term goals as a few take-home lessons for India from the international crisis.

“If my prescription against recession for people in the U.S. is to start to shop, the antidote for India is for people to start to spend,” he said. The situation emerging in India was one of affordable credit expansion based on friendly interest rates and readjustment of luxury tax on consumer durables. Therefore, banks must start lending and consumer must not baulk at spending, he said.

“Next Practices”

Pointing to the rapid proliferation of mobile phones across India, Mr. Prahalad advocated a similar “cellphone culture,” substitution of “Best Practices” with “Next Practices” in all businesses that gave it a leadership role in benchmarking practices and greater use of renewable energy resources.

However, the impact of the global recession went beyond liquidity and credit crunch. Of immediate concerns to India, “which were more of asymmetric pain in some parts and not enough to pull down the whole economy,” were the ferreting away of nearly $18 billion risk capital by foreign businesses desperate to shore up their positions, the retrenchments taking place across the world and the disruption of the global supply chain that had already hit selective sectors such as textiles and automotive industries, Mr. Prahalad said.

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