The Great Depression of the 1930s shifted the geo-political and economic balance from the UK and Europe to North America. Will there be a similar shift of balance from America to Asia now as a consequence of the current crisis?
According to former Reserve Bank of India governor YV Reddy, there is a broad agreement that the crisis has reaffirmed the prospect of Asia re-emerging as a dominant region within a decade or two.
“My view is that there are opportunities and prospects but significant challenges remain to be addressed at national levels and to some extent regional level for Asia to aspire to exceed or equal the dominance of Anglo-Saxon or Europe-American regions,” Reddy said while delivering the Justice Konda Madhava Reddy memorial lecture here on ‘Global Financial Crisis and Asia’.
To substantiate his contention, Reddy said Asia continued to perform well, with China and India leading the growth during the current crisis. It was also “noteworthy” that the exit from huge stimulus to manage the crisis has already commenced in parts of Asia.
During the crisis, he pointed out, financial markets in most of Asia faced some temporary turbulences but financial institutions, banks included, did not generally warrant bailout by government or central banks. The growing importance of Asia was recognised in the ongoing dialogue on the reform of global financial architecture.
In this context, he referred to Angus Maddison's 2001 publication, which estimated that in the year 1700 India accounted for 24.4 percent of the world's gross domestic product, China for a similar share and Japan a fifth of India’s share.
Thus, Asia accounted for a major part of world's economic activity three centuries ago. “After the current crisis, and noticing trends in growth and resilience of Asian economies, there is a view that Asia will re-emerge to dominate the world economy soon,” Reddy said.
He, however, explained that these were his random thoughts which were “general rather than technical, pragmatic rather than ideological and above all exploratory and conjectural rather than conclusive or predictive.”