The way “I see the global economy, I think we’re entering into a recession again in most advanced economies… I think we’re already into one in the US based on the hard and soft data - same with most of the eurozone, same with the UK.” These frightening words at a Bloomberg Dealmakers Summit in New York, last week came from Nouriel Roubini, a celebrated American economist and the man who predicted both the collapse of the United States housing market and the worldwide recession, which started in 2008.
These statements have come as the Euro debt crisis is already threatening to spill over into other parts of the world. Roubini, who is also a professor at the New York University’s Stern School of Business and co-founder and chairman of Roubini Global Economics LLC, then went on to say “We are running out of policy bullets… At this point, the issue is not whether there is going to be a recession or a double-dip, but whether it’s going to be relatively mild or whether it’s going to be a severe recession and a global financial crisis…The answer to that question depends on what’s going to happen in the eurozone and whether they can get their act together.”
And as if agreeing with him, US President Barack Obama speaking at a town hall meeting in California, two days later had this to say. "So they are going through a financial crisis that is scaring the world and they are trying to take responsible actions but those actions haven't been quite as quick as they need to be." What he meant was that - the financial crisis in Europe is contributing to slow economic growth worldwide and that leaders in the euro zone were not dealing with the issue quickly enough.
So what do these words mean for India and other emerging markets? The answers are not comforting, atleast not in the view of Robert Zoellick, the World Bank president. He opines, "The world is in a danger zone…While developed countries stumble the situation for emerging markets may be changing for the worse.”
In that context there could be panic ahead. We must accept that we are seeing historic changes in the fiscal system and more staggering and perhaps, shocking changes are yet to unfold. We must accept that we are in the middle of a global economic crisis….And India should prepare accordingly.