Page - 1

Dear Santa,

The World Economy is sick. Can you fix it or should we trust the policy-makers on this one?

OK, let's look at what the policy-makers are doing this Christmas. Well! They are all busy creating and wrapping stimulus packages. God help them. No seriously, please God, do help them, as they are all going into the unknown.

Stimulus package, by definition, are designed to stimulate the economy and stop it from sleeping into deeper recession which could lead to deflation. It's not a rocket science, we know that. So what's the problem? Any stimulus package with a very short term focus might not deliver the desired result; the package should have a long term objective and not be designed as a quick fix. Unfortunately, there is no silver bullet and no quick fix. The policy-makers are in a conundrum. We have seen how the US and UK governments have taken a very proactive and aggressive approach to fight RECESSION. It's not clear if the measures taken so far are working. The idea is to throw everything at the wall in a hope that something will stick. The problem is, nothing is sticking. And despite all their efforts, major world economies are sliding deeper into recession. The recent drop in Japanese exports suggests that the worst is still to come. And with the Chinese economy also not doing as well as expected, the health of the world economy is getting worse.

The trillion dollar question is what should be done? Doing nothing is just not an option.

Should the world unite under a global stimulus package? Well, NO! Remember, one size does not fit all. The economies are at a different level of development. A universal solution will simply not work and might even be counter-productive. A smart and tailored stimulus package should do the trick without damaging the economy.

So, what will be a smart and tailored stimulus package for India?

Keep it simple, don't loose long term focus, identify growth areas, increase spending on public sector services including policing, education, healthcare, homeland security; increase spending on infrastructure, energy, R&D among others. Provide targeted incentives that will leave more money in the pockets of companies and individuals, and offer more flexibility in this turmoil. This should boost the consumer confidence.

Next

Sanjeev Kumar is Chief Executive Officer of Delamore & Owl Group of Companies (Website: www.delamoregroup.com), Toronto, Ontario, Canada. He holds dual Master's Degrees - one in Business Administration and another in International Finance. He has been the recipient of the "Southeast Asia Young Achiever's Award" for Year 2002.
Article posted on December 28, 2008.