Avoid post-crisis mistakes, Spence cautions India ........

It’s absolutely essential... capital controls help manage domestic money supply Michael Spence Avoid post-crisis mistakes, Spence cautions India

ECONOMIST




Partha Sinha
TNN
Mumbai: Michael Spence, the 2001 Nobel prize winner for economics and a member of World Bank’s Growth Commission, has cautioned Indian policy makers against being overconfident about how the country was steered during the recent crisis and make policy mistakes. Spence says how Indian policy makers reacted during the crisis was “very good” and the subsequent turnaround has given them confidence, but he feels now is the time to drive growth and avoid post-crisis mistakes.


The Nobel laureate is in India to release the World Banksupported report titled ‘Post-Crisis Growth in Developing Countries’ and also to deliver the keynote address at RBI’s international conference for economic researchers.


“India’s resilience to the crisis was clearly very high... it was very impressive,” Spence told TOI. “For example, the services business has weathered the storm well and can go back to high rates,” he added. ( Now what does it mean by "Service Business"?)


The Stanford University professor believes that the direction for the policy makers at the Centre is right, with the focus on infrastructure, education, land and labour market reforms, and cutting down the time taken for legal recourse.


But “getting it done... implementation of these policies, is the main challenge”, he said.


On the debate on capital control, Spence takes the side of developing nations like India, which favour such measures. “It’s absolutely essential... capital controls help manage domestic money supply.”


Spence feels they insulate developing nations from the volatility that global capital markets bring in. Even some of the developed nations had resorted to capital controls during their growth phase, he said.


On economic stimulus, Spence says it should be withdrawn slowly. He calls the spike in the food inflation in Inida a distribution issue. But he is against total control of prices because he feels that some amount of higher prices acts as an incentive for those on the supply side.


On the tough language used in the report by the World Bank commission he chaired, Spence said the crisis was a “massive failure” for the Wall Street. It was thought to be self-regulated, requiring no outside regulation, but “it blew itself up”.

My Comments:

Now when we read this view of an economist who is a forienger, he clearly has appluaded the policy matters of India and RBI and the Capital Control that was done when Mr.Y V Reddy was at the helm of the affairs as an Governor of RBI.
But now as we have whethered the storm he also catiouns about not falling in mistake of post economics crisis.
He says that Indian Service sector has whethered the storm and has come back strongly.Now what is this service sector.What comes in that sector.
Sure,Logistic sector will come in.But the sector which I am betting on is IT service sector.There will be huge stake in this sector as whole lot of state will undergo through various changes and each state will have to change and keep updates for each and every form of datas.
So from doing data works in Jails, Municipalities ,Courts , Schools, Colleges, Universities, Railways , Telecommunication(BSNL,MTNL)Buses and many more such institution will have to take help of IT sector.And these orders will be in billions of rupees.
There is a very big stake in this sector and I don't think I have to elaborate which co fitsin this category......