Saturday, January 3, 2009

Another Indian Economic Stimulus ...

... announced yesterday. Question is - will this be enough?
I fear not - the automobile, real estate and consumer durables companies are fooling themselves if they think the availability and cost of bank financing are the only reason for depressed demand. People generally, at all income levels, are putting off inessential significant purchases until there is more clarity on how bad things will become and if they will have a means of livelihood in a few months. The depressed value of their investments is another factor. The Government's attempts at talking things up have only damaged their own credibility.
So what could work? My suggestion would be for infrastructure spending to be jump started significantly. The follow on benefits through the economy and internationally could be significant. While the Government clearly couldn't afford all the spending involved there is private (domestic and foreign, strategic and financial) investment interest in Indian infrastructure and the impediment has often been the often unforeseen and unplanned inefficiencies that affect significant Indian projects.
To address this, let's get major project sponsors, vendors, investors, lenders and of course senior relevant Government officials, into a room (one for each major infrastructure sector - utilities, roads, ports etc. to keep sizes manageable) and they pretty much stay there until a set of steps to be taken immediately and over the near and medium terms are agreed to by all parties. I think we would be foolish to not even attempt this.
Any thoughts?

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