Third Day of IIMA Confluence 2008 Dedicated to Current Financial Crisis

Third Day of IIMA Confluence 2008 Dedicated to Current Financial Crisis

The third day of Confluence 2008 was entirely dedicated to the current financial crisis. All the events and speaker sessions revolved around the broad theme of ‘Crisis to Control’.

Speaker Series

November 21st evening concluded with an address by Dr. Sam Pitroda, Chairman of the National Knowledge Commission and CEO of World Tel. Dr. Pitroda, whose pioneering vision played a crucial role in India’s telecom revolution, stressed the importance and pervasiveness of Information & Communication Technology (ICT) in all walks of life. According to him, "...Telecom is not about telephones, it is about re-structuring the society." He described some of the challenges faced by him and his team as they laid the foundation for India’s progress in the telecom sector in the 1980s. "The telecom revolution has created wealth, jobs, improved productivity and empowered people," he opined.

He spelt out his vision of 'fibre technology in every home, bringing with it all kinds of ICT capabilities ranging from video-conferencing to virtual reality'. Dr. Pitroda also fielded questions from the audience on a range of topics such as the role of telecom in the transportation sector, the urban rural divide, and the politicisation of telecom in the country.

Keeping in mind the theme for November 22nd, the Speaker Series resumed with Prof. Satish Deodhar of IIM Ahmedabad chairing the session. Lord Meghnad Desai, Professor Emeritus, London School of Economics and Mr. N. Ramchandran, India Country Head, Morgan Stanley, were the speakers. The distinguished speakers spoke about the causes, effects and the possible aftermaths of the present global crisis.

Lord Desai opined, "...there are two crises that are prevalent now. One is the crisis in the financial markets and the other is the downturn in the real output cycle." He stated that the boom that had preceded the present bust was unique in many ways. The developing economies were for the first time active beneficiaries of the boom, the aid being supplanted by FII and FDI flows into these emerging economies. Lord Desai commented that it was the longest boom period in the living history. Moving on to the present financial crisis, he said, "Financial innovations which were responsible for the boom are the causes of the downturn that followed." He also commented that the credit crunch in the global economy was affecting the real output cycle in a bad way. Lord Desai also argued, "Though it may be difficult, the regulators and policy-makers must understand that the cycles in the real economies are inevitable." He stated that the turmoil in the financial markets was because of the exceedingly complex instruments whose risk implications were not understood by the top management of the various banks.

Looking forward, he stressed upon the need to change the governance of international financial bodies such as the IMF and the World Bank. Explaining the rationale behind this need, he said, "Eastern countries are now the primary lenders for the global economy, so it is imperative that they have a greater say in how these institutions are run." Commenting upon the monetary and the fiscal policy that is being used to tackle the crisis, he pointed out to the fact that there was no alternative plan to control the crisis. He concluded by saying, "In the worst case scenario, the governments will have to act as a direct lender to businesses and individuals."

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* Contributed by -
Ravi Shankar,
IIMA Confluence 2008,
Indian Institute of Management, Ahmedabad.

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