The worldwide credit crunch following the financial crisis, coupled with a protracted recession in the US and other advanced economies will have major implications. The decline in the US economy will leave an influence on the global power exercised by US imperialism.

Efforts by other advanced and developing countries to find a way out of the crisis can strengthen the trend towards multi-polarity. With faith in the “free market” getting eroded considerably following the financial meltdown, the hegemony of neo-liberal policies will be challenged. Developing countries like India need to rethink their economic development strategy in this backdrop.

There is an urgent need to shift the focus away from trade liberalization and external markets and work towards generating domestic market based stimuli for economic growth. More importantly, the Indian financial system needs to be insulated from the turbulence being witnessed in the financial markets of the US and elsewhere.

Not only should the ongoing moves towards greater financial liberalization and deregulation be stalled, regulations need to be tightened in several areas like bank lending, investment in capital markets and real estate and FII inflows.
R.S.Dahiya