Needed, now: Dr Singh's Manmohan moment
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It is not as if the policymakers, leaders of the economy, including the Finance Minister and the regulators, have done nothing. Significant steps have been taken over the past two weeks to unfreeze liquidity and to improve confidence in the banking system. But the responses so far have been defensive, reactive, behind the curve. This has to end now. And the onus is on the Prime Minister to do so. This is too big, and too complex a crisis to be left to professionals. Political leadership at the very top has to step out and assure the people that the economy and the financial system is safe, as it should be, given the health of our banks and overall fundamentals.
That doubts remain in spite of these positives, is a fact you can argue with, but not deny. That is why India and the world don't merely need the Prime Minister's words of reassurance, they need to see decisive action. Now. Preferably in Parliament today, before he leaves on his foreign visit, that will take the rest of this working week.
He has to make a categorical statement that India is resolute and focussed enough to ensure it will not allow any bank, debt mutual fund or Non-Banking Financial Company (NBFC) to collapse in these days of liquidity crisis. Just a bland "your deposits are safe" won't work. He has to announce an intention to invest in the capital of all the major banks. Of course, these can be sold off in three years, most likely on a profit. Then he must categorically state that liquidity, a purely self-inflicted disaster in India, will be provided and signal significant rate cuts. The Prime Minister is wise enough to know that the time for the usual Indian incrementalism is gone. The great doctor of economics knows fully well that homoeopathy, delivering the drug in small doses, won't do.
His British counterpart Gordon Brown has shown how decisive, but big steps taken early enough, can help. He was the first to announce a massive capitalisation of his banks and now not only do G-7 and Europe look for his leadership, even the US took his template. His stock has even gone up at home. In fact, some go so far as to say that with one display of decisive, bold action, he may have turned the tables on the Conservatives. What helped is the fact that he is a former Chancellor of the Exchequer and people think he should know what he is doing. Of course, Dr Singh has been a former finance minister, central bank governor, finance secretary and Planning Commission head, besides being a world class economist. His Finance Minister, his Planning Commission chief, his regulators, including the RBI governor and SEBI chief, are a team so honourable and formidable that had they run an international consultancy today, they would have been flooded with calls for help.
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