The economic recovery almost two years after the manifestation of global crisis has been uneven and the outlook for the global economy is unclear, said YV Reddy, former Reserve Bank of India governor.
The crisis has been a testimony to the failure of economic policies and institutions, he said delivering the Waheeduddin Khan Memorial Lecture on ‘UN Commission on global crisis: Working and recommendations,’ organised by the Centre for Economic and Social Studies here.
The report of the UN Commission, set up in September 2008 to discuss the implications of the crisis for developing countries, would provide a good reference for assessing the current status of efforts to create a new set of policies and institutions for a better global economic order.
“The emerging economies are leading the revival of global economy and are indicating medium to long-term growth prospects. Further, developments in Euro, particularly in Greece and later involvement of assistance from the IMF there, exposed the potential for vulnerability in advanced economies,” he said.
According to Reddy, there are signs of the IMF reviewing its ideological positions. However, there is an unstated sense of urgency to reforming the international monetary system. China has expressed its discomfort with the current status of the US dollar being the dominant reserve currency. For the US too, it imposed constraints on the conduct of domestic policy.
“It is extremely difficult to design a global monetary authority that could issue a global currency. Resolving the issue of reserve currency and mechanisms for enforcing the fiscal coordination among countries are critical for less unstable globalisation of economies,” he said.
