The financial crisis’ impact is rippling across the globe. India’s marginally less affected only because its growth has mainly been driven by domestic growth and consumption. Nevertheless we need to undertake several short-term and long-term measures, to cushion the meltdown’s impact. Support programs for smaller businesses should be explored by the ministries concerned, the department of labour and the Small Industrial Bank of India. Unskilled labour which, laid off and returning to the village, could be re-employed temporarily if programs like the NREG are fully funded and made to work as they were meant to. We need not pay people to dig and fill up holes, as Keynes suggested to stoke demand; there is already sufficient need for rural works, particularly roads and drains built to quality specifications. Expenditure will have to expand to meet these requirements. Country after country in the Western world is abandoning fiscal deficit targets so that some part of the liquidity lost by the de-leveraging of financial institutions is restored and existing levels of business activity maintained. The message emanating from the United States (post Reagan) and the United Kingdom (post Thatcher) is for “stimulus packages”; here, putting FRBM on hold for the duration would be a sound idea, one acceptable to all political parties.

We should not underestimate the direct employment effects of the American crisis on NRIs and PIOs. The financial sector was awash with such people; and there is a case for the foreign ministry to develop a support system for threatened families. Some might consider them too affluent to justify such support; but it would be a kind thought to set up networks and offer counseling as well as information about relocating to India. Such families are particularly vulnerable to visa and immigration laws, too rigid at present to give them the space and time needed to bounce back into new jobs. Such restrictions are tightening, which affects young high-skilled Indian immigrants and students. The diplomatic environment is favourable because of negotiations on nuclear power; we should canvass for leeway for our nationals in immigration statutes during the adjustment period. Downward pressure on the middle class’ pay packets through competition from returning Indians will be an added difficulty. Over a longer period, it could even lead to a major shift in preferences for professional qualifications in higher education, especially if domestic IT pay decreases.

... contd.