The recession has not gone away. The developed world is still bleeding. There has been a turnaround in output, which has stopped falling sharply. Unemployment is still rising though not as fast as before. Banks are back to making profits but show little signs of returning the large sums of money that has been poured into them.

The IMF and the World Bank are meeting in Istanbul. The mood is sombre. The recession has turned a corner but the economies of the West are nowhere close to where they were in the middle of 2008. There will be sluggish growth for a few years while everyone adjusts their economies to new habits. Americans will need to save more and their government will have to balance its budget. The vast sums spent shoring up the economies have added hugely to the debt-income ratio and this will have to sorted out.

China and India and the rest of Asia have escaped the worst of this recession. They have had a growth slowdown but no serious meltdown. But they too will need to adjust as the developed world slows down. For 15 years everyone lived happily and guiltily on America’s excess consumption and piled exports into the US and then lent the dollars back to Americans. Now, if the Americans sober up, the world will have a hangover. China cannot go on growing as it does, exporting a large share of its output. Like India, it will have to spend more money at home on houses and furniture and cars. India will have to be wary that the big boom in the Sensex will not last forever. At present, loose money has nowhere else to invest itself so it comes to Asia. But once the spring returns to the developed world, the money will shoot out.

... contd.