More than Tata Motors which must be relieved to have found a new ‘home’ for its Nano, it is Gujarat Chief Minister Narendra Modi who must be rejoicing. He has snapped a prestigious project for which many other states were vying. More important, getting Ratan Tata to praise him publicly should help remove some of the stigma that got attached to him after the Godhra massacre. Maybe the state needs to come clean with the sops it has given the Tatas as well as give reasons for why these have been given. After all, this was a state that has the reputation of not giving any sops anymore.
Anil Seth, Gurgaon
Worse to follow
All those hoping the $700bn bailout package in the US and a fairly large one in the UK will help stabilise markets will do well to read the latest series of reports from the IMF. The IMF makes it clear that the extent of bailout that is required is far larger than anyone had forecast earlier. So, within a period of less than six months, the IMF has increased its estimates of the mark-to-market losses to $1,450 billion from $950 billion earlier; this latter figure was itself a huge hike compared to the first estimate of around $400 billion. So each time the IMF comes up with a new report, the estimates rise! The next IMF report is due in April, so don’t be surprised if the bad news is once again escalated.
In any case, the IMF report points out, the saga of defaults and write-downs still has a long way to go. If the housing crisis stabilises, the near-recession forecast for both the US and the Euro area for the next 15 months will ensure a series of corporate bankruptcies — and therefore another series of large defaults, write-downs and possibly, more bankruptcies.
India’s policy makers need to keep this in mind instead of just routinely saying India will not be affected by what’s probably the worst financial crisis in a very long time.
Satish Kapoor, New Delhi
At what cost?
Rajiv Kumar (“The heavens haven’t fallen yet”, October 9) is right in pointing out that India is quite well insulated from the global turmoil. As he points out, the low level of financial inclusion serves as a blessing in disguise at the current moment. But while congratulating ourselves for not falling victim to the contagion, we need to think about the efficiency gains we’ve lost by not reforming the financial system all these years. If the spreads between what banks borrow and lend at are so high, this makes Indian businesses inefficient and hence results in lower job creation. If, as the Mumbai International Financial Centre (MIFC) report points out, India is exporting financial jobs by not doing enough financial sector reforms, this is another big efficiency loss.
Alok Varma, Mumbai
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