THE IMPACT OF THE GLOBAL FINANCIAL CRISIS ON INDIA AND POLICY RESPONSES

by Dr Raghbendra Jha, Professor and Executive Director, Australia South Asia Research Centre, Australian National University

The world economy is still reeling from the impacts of a severe financial crisis. Hundreds of billions, if not trillions, of dollars in capital value have been lost in stock markets. Inter-bank credit has almost frozen up, and even with falling central bank interest rates, actual costs of borrowing have gone up. Unemployment has been rising and major world economies are in or close to recession.

Attempts are being made to address this crisis through a variety of policy initiatives, primarily by the injection of vast amounts of public funds into financial institutions and the provision of sovereign guarantees on bank accounts.

This article explores how the Indian economy is expected to fare in the short-term and how Indian policymakers have responded to the crisis.

So far the global financial crisis has had three major impacts on the Indian economy: (i) the quantum of liquidity available during the first half of financial year (FY) 2008-09 is about a third lower than during the first half of FY 2007-08; (ii) with slackening external demand, export growth is expected to slow; and (iii) foreign institutional investors have withdrawn from Indian stock markets, leading to sharp falls in key indices.

The immediate impact of the crisis on Indian economic growth is likely to be muted. From a growth accounting perspective Indian economic growth, fuelled by higher savings and investment (now over 35% and 36% of GDP respectively),the demographic dividend of a younger (median age 24.9 years), more educated labour force and accelerated total factor productivity growth,

has been rising and becoming more stable for the past 25 years. For the past three years the economy has grown at 9%, giving the Indian economy considerable momentum. Second, during the current financial year trade growth has been impressive with exports rising 35.1% in dollar terms and imports 37.7% during April-August 2008. Investment has been buoyant and foreign direct investment during 2008-09 is expected to reach US$35 billion.

Indian banks have strong balance sheets, are well-capitalised and well regulated. The capital adequacy ratio of every Indian bank is well above Basel norms and those stipulated by the RBI. Not one Indian bank has had to be rescued in the aftermath of the crisis. India has a long history of working with public sector banks and in engineering bank rescues.

India’s growth rate will slow in 2008-09. Growth during the quarter ending June 2008 was 7.9%. The current consensus for fiscal year 2008-09 is 7.5% to 8%.

Principal reasons for this only modest drop in economic growth include: (i) a large and diversified consumption base for the Indian economy; (ii) India’s trade to GDP ratio is much smaller than that of, say, China; (iii) Indian financial markets are still relatively insulated from global financial markets. India has a healthy external balance, with high foreign exchange reserves, low ratio of short term external debt to GDP and less than complete capital account convertibility.

Nevertheless, there will be a significant slowdown compared to recent experience. The slower growth will be accompanied by reduced employment growth and slower poverty reduction.

Indian policymakers have responded with measures to enhance liquidity – primarily by reducing borrowing costs by lowering the cash reserve ratio and the repo rate – and enhancing confidence. Bank guarantees, beyond those that already exist, have been deemed unnecessary.

In 2009-10, if the world economy recovers, India can grow at 9% or more. If the world economy remains in recession forecasts of Indian growth rates are harder to make.

Links:

• See Reserve Bank of India http://rbi.org.in/scripts/BS_ PressRelease
  Display.aspx?prid=19373

• Australia South Asia Research Centre website:
  http://rspas.anu.edu.au/economics/asarc/

• The 2008 Lowy Lecture on 3 December will be delivered by Ian Macfarlane AC , former Governor of the Reserve Bank of Australia and inaugural Chairman of the Council of Financial Regulators. It will address the subject of Australia and the International Financial Crises: see http://www.lowyinstitute.org

REACHING OUT TO ACEH

by Eve Warburton, Program Officer, Aceh Research Training Institute and Australian Youth Ambassador for Development (arti.aceh@yahoo.com)

Already isolated from the rest of Indonesia and the international community by thirty years of civil war, Aceh’s universities were hard-hit by the tsunami of 26 December 2004 because many academics lived in the worst-affected areas of Banda Aceh. As part of the international response to the crisis, the Aceh Research Training Institute (ARTI) was established by a consortium of nine Australian universities and a number of partner universities in Indonesia. The project is a three-year commitment as part of AusAID’s Aceh Rehabilitation Program (ARP).

ARTI’s programs aim to contribute to the development of a vibrant research community through training courses, research opportunities and the fostering of new research networks in Aceh and beyond. The institute’s first director, Dr Laura Yoder, was responsible for the design, coordination and implementation of ARTI programs from their inception in 2007. In 2008 Prof Harold Crouch took over the director’s role and Eve Warburton, an Australian Youth Ambassador for Development, joined ARTI as Programs Officer. The Australian members of the team are capably assisted by Melizar, the project’s Office Manager.

ARTI is focused on expanding the quality and accessibility of locally produced research, working in partnership with Universitas Syiah Kuala and other local universities. ARTI’s principal objective is to build the capacity of individual researchers to undertake high-quality, relevant social science research. Training consists of three levels of selective entry courses in research methodologies. To date ARTI has trained over 400 local academics, NGO staff and civil servants in basic social science research methodologies.

From this pool, over 80 of the most promising researchers have gone on to attend level 2 courses, which consist of more in-depth methodological training in specific areas of research that are particularly relevant in the Acehnese context. So far, ARTI has run courses on Islam and Law (Dr Arskal Salim), Gender in Society (Prof. Virginia Hooker), Poverty and Livelihoods (Dr John Maxwell) and Environment, Development and Institutions (Dr Suraya Affif). As part of their studies, level two participants produce a research proposal linked to the theme of the course, the best of which are accepted into the third and final level, in which participants receive funding to conduct an extended research project under the supervision of Indonesian and international academics.

So far 17 Acehnese researchers have received ARTI funding for their research proposals and are now applying the analytical and methodological skills they have acquired in their own fieldwork. They will soon be writing up their findings as journal articles. The researchers are also encouraged to attend conferences and seminars, and to share their research findings in local forums.

ARTI’s courses are also intended to create opportunities to share resources and expand personal networks by bringing together Indonesian and international academics to work in partnership with researchers in Aceh. In addition to the training program, ARTI offers travel grants to Indonesian and international PhD students, giving them the opportunity not only to conduct their field work, but to contribute to courses, share resources and network with local researchers and course participants. As a result, one of the most important and sustainable outcomes of the project has been the professional and personal contacts that Acehnese participants have made with guest lecturers, supervisors and PhD students from around Indonesia and the world. These networks provide access to people, books, articles, ideas and information in a context where technological and institutional limitations prevent ready access to such resources, and lay the basis for the development of a sustainable, vibrant research community in Aceh.

Links:

• Aceh Research Training Institute: http://www.arti.unimelb.edu.au

• Australian Youth Ambassadors for Development: http://www.ayad.com.au/aspx/home.aspx

Q:When did you become interested in Asia and why?
A: I’d like to be able to say that it was because of a calculated assessment of where Australia’s national interests lay, or even a sense of personal commitment to the region. However, such was not the case. I was at the University of Queensland studying for a degree in Economics (you can see how misspent my youth was), with a minor in history. After some standard British/European units ? ‘Britain, 1485-1815’ remains etched in my mind ? I decided I wanted something different. I asked around fellow history students about which lecturers were interesting. Several people mentioned Chris Penders, so I decided I would enrol for whatever he was teaching. It turned out to be Southeast Asian history. Chris was indeed a very good lecturer, and got me really interested in what he was teaching, and in particular Indonesia. I ended up doing my PhD on Indonesian history under his supervision. I then got my first lecturing job in the School of Modern Asian Studies at Griffith, and worked with people like Colin Mackerras. I don’t think we had mentors in those days (modesty prevents me from saying exactly when those days were), but if we did, Colin would have been mine.

Q: What are your current preoccupations? And how do these fit into the contemporary scene?
A: Indonesia is still central to my professional (and personal) interests. For the past couple of years I have been working on the history of Indonesian sport, a subject which bemuses some of my colleagues but which provides rich insights into the way contemporary Indonesian society has evolved. Gender, ethnicity, religion, history, politics, popular culture and class are all reflected in the sports people play, and the ways they play them. There are growing bodies of knowledge about the roles of sport in places like India and China, but very little has been written about Indonesia. I suspect that part of the reason for this is that the only sport which Indonesians play at the highest international level – badminton – is almost unknown here, and in the US and the Netherlands, the places where scholarship on Indonesia is the richest. Now if things had gone differently in 1824, when the British and Dutch signed an agreement dividing up their colonial possessions in Southeast Asia and Indonesians had ended up playing cricket . . . !

Q: What are your hopes for Asian studies in Australia?
A: That one day we will get to the point where no one will feel the need to ask this question, because the strength, vitality and centrality of Asian Studies will be so great as to render it unnecessary. But that is not going to happen any time soon. Indeed, I am probably more pessimistic today, at least about the Indonesia side of Asian Studies, than I have been for a long time. There are certainly some very talented early and mid career people in the business, but outside the major centres I worry about where they will find jobs in the longer term, and who they will teach.

The one bright hope for Indonesian studies is the Australian Consortium for In Country Indonesian Studies (ACICIS), led by David Hill at Murdoch University. ACICIS currently sends around 35 students to study in Indonesia each semester, a figure which is both shamefully low (given the significance of Indonesia to Australia’s present and future) and gratifyingly large (given the external circumstances ACICIS faces). Probably the most significant factor limiting student participation in programs like ACICIS is the prevailing negative public perception of Indonesia, which is also reflected in universities. ‘Risk management’ is the growth industry in universities these days. It is, I know, an unfortunately necessary part of what institutions must do in the responsible exercise of their duty of care to students and staff. But I do wish that more universities sought input from staff with Indonesian experience and expertise before making decisions about limiting (or even banning) travel to the country.

Links:

When Jo-Anne Gilbert borrowed the book Wild Swans, by Jung Chang, from a Townsville Library, she didn’t realise the impact that it would have on her life. The personal story of life in China and the turmoil of the Cultural Revolution fuelled a curiosity to learn more about how such an event could happen in Jo-Anne’s lifetime. She soon ran out of books in Townsville on the topic. When Jo-Anne moved to Brisbane with her husband and children she was able to indulge her curiosity about China by enrolling in an Asian Studies degree at Griffith University and learning Mandarin. She made her first visit to China in 2003 as part of a field study; it was also her first overseas trip. She found China a vibrant and exciting place, and welcomes every chance to return.

China’s anti-satellite test on 11 January 2007 alerted Jo-Anne to a little known field of study in Australia, which she pursued, subsequently completing an honours degree in international relations on the history of the Sino-US space relationship. Jo-Anne is now enrolled as a PhD student at the Griffith Asia Institute. Her research looks at the association between the United States and technology and the impact this has on foreign policy, in particular considering the political and security implications of space programs that are evolving in the region. Many countries in Asia have dynamic space programs, particularly India, Japan and China. These have political implications in a world where space technology has, until recently, been dominated by the United States. Next year Jo-Anne will attend the Space Policy Institute at George Washington University, Washington D.C. as a visiting scholar. She feels fortunate and proud to be involved with the Griffith Asia Institute, which has a collegial and dynamic atmosphere, and where she is surrounded by excellent scholars with diverse and engaging interests. http://www.griffith.edu.au/business/griffith-asia-institute/staff/ms-jo-gilbert

http://hahn.zenfolio.com/f320124069

In this website, Thomas H. Hahn, of Cornell University, presents galleries of photographs covering various aspects of the Cultural Revolution in China (1966-1976). Much has been written about this traumatic segment of China's recent past, but until now the subject has not been well covered visually.

Launched at the Art Gallery of New South Wales in 1997, the Arts of Asia is a year-long lecture series which draws on the expertise of Asian art scholars and curators, both nationally and internationally, including the staff of the Art Gallery’s Asian art department and many ASAA members. In 2009, the theme of the lectures, which take place on Tuesdays from 1pm to 2pm is Decoding Dress. The lectures will examine the political and social forces influencing such modern developments as the Nehru jacket and the Mao suit. To register online go to www.artgallery.nsw.gov.au/events/courses

THE CRICKET AND THE DRAGON ANIMALS IN ASIAN ART, 17 October 2008 to 15 March 2009, Melbourne. Aimed at children of all ages, this exhibition explores images of animals from the National Gallery of Victoria’s Asian Collection. The exhibition covers all media and a wide time period. http://www.ngv.vic.gov.au/cricketandthedragon/index.html

A SECRET HISTORY OF BLUE AND WHITE, exhibition, 28 November to 1 February 2009, Gosford. This exhibition highlights the diversity and strength of Australian ceramics and positions it within European and Asian ceramic histories. It has been developed by Asialink and the Jam Factory, Adelaide and is supported by the Australian Government. 28 November 2008 - 1 February 2009, Gosford Regional Gallery: http://www.gosfordregionalgallery.com/

THE TALE OF GENJI – film, 29 November, Sydney. This 1951 film directed by Yoshimura reinterprets the classic 11th century Japanese novel by Lady Murasaki (considered the world’s first novel). Genji, the son of the emperor, has gained renown among the nobility of Kyoto for his charm and good looks, yet he cannot stop himself from pursuing a forbidden object of desire: his father’s young and beautiful bride. Newly struck, imported 35mm print courtesy of the Japan Foundation.

GLOBALISING RELIGIONS AND CULTURES IN THE ASIA-PACIFIC, 1-5 December 2008, Adelaide. This conference is the 2008 Signature Event for the Asia-Pacific Futures Research Network. With religion and culture as the key themes, the conference covers areas central to understanding the current state, diffusion and evolution of religious beliefs in the Asia-Pacific as well as their cultural and other consequences. In addition to its academic conference, the Event features three major public forums, link-ups with Australian media, side events and tours. The culminating event, the conference banquet, will be held under the direction of one of Australia’s most famous chefs, Simon Bryant. Contact: sigevent08@adelaide.edu.au or go to at http://www.adelaide.edu.au/sigevent08/

ISLAM AND SECULARISM IN MALAYSIA, workshop, 4 December, Canberra. This workshop includes speakers Prof. Andrew Willford (Cornell), Dr Yeoh Seng Guan (Monash-Malaysia), Dr Farish Noor (NTU, Singapore) and a screening of short films relating to Islam and secularism in Malaysia. For more information, contact Dr Gaik Cheng Khoo gaikcheng.khoo@anu.edu.au

AUSTRALIA'S OPEN INVESTMENT FUTURE, symposium, 4 December, Melbourne. This symposium will look at the Australian investment climate, motivations behind foreign investment, the players seeking to invest, their objectives and the barriers they face. It is organised by the Institute of Public Affairs and co-sponsored by the Victorian Division of the Institute of International Affairs, the Australian APEC Study Centre at Monash University and the Melbourne APEC Finance Centre. 4 December, 9.00am - 5.00pm, Grand Hyatt, 123 Collins Street, Melbourne. $110 inc GST for APEC Centre / MAFC friends - quote 'MAFC' on the registration form. Contact: Institute of Public Affairs - (03) 9600 47477 www.ipa.org.au

BEHIND FORGOTTEN EYES, film, 5 December, Sydney. During World War II, the Japanese Imperial Army forced more than 200,000 Korean women into sexual slavery. Narrated by Lost's Yunjin Kim, this film investigates the enduring legacy of their story. 5 December, 6.30pm, Chauvel Cinemas, Paddington Town Hall, see: www.hraff.org.au

MALAYSIA AND SINGAPORE IN THE NEW MILLENNIUM: Contesting Old Paradigms, 5-6 December, Canberra. A conference on Islam, secularism, 2008 elections, gender, ethnic politics, migrant labor, civil society, bilateral/regional relations, biography/ autobiography, terrorism, human rights. Convenors: Lily Zubaidah Rahim L.Rahm@usyd.edu.au; John Funston jfunston@pcug.org.au. For further information contact Ms Sue Mills sue.mills@anu.edu.au http://www.une.edu.au/malaysiasoc

A NEW TRADE POLICY FOR AUSTRALIA. The China Oration and dinner, 8 December, Melbourne. The China Oration is the Australia China Business Council’s premier event of the year. The Minister for Trade, the Hon Simon Crean, will deliver this year’s oration, in which he will examine the future on Australia’s export capacity, international competitiveness, trade policy and trade development programs and services. Monday 8 December, 6.30 pm for 7.00 pm start Clarendon Ballroom, The Langham Hotel, One Southgate Avenue, Southbank. $125 members; $150 non-members; $1,200 corporate table (of 10) (incl. GST). RSVP with payment by 1 December: acbcvic@acbc.com.au

GENJI - THE WORLD OF THE SHINING PRINCE, 12 December 2008 to 22 February 2009, Sydney. 2008 marks the 1000th anniversary of Japan’s oldest novel, The Tale of Genji, written by the court-lady Murasaki Shikibu. Since the 12th century, the 54 chapters of the tale have inspired Japanese artists to visualise the fascinating world of the story’s main character the Shining Prince (Hikaru Genji) in countless hand scrolls, folding screens, hanging scrolls and albums. Painted mostly by artists of the Kano, Tosa and Sumiyoshi schools, these pictures (Genji-e) reflect the refined aesthetics of the courtly tradition. This exhibition at the Asian Gallery of the Art Gallery of NSW features 70 works drawn from the Gallery’s collection as well as loans from other Australian major public and private collections of Japanese art. See http://www.artgallery.nsw.gov.au/exhibitions/coming/genji

SHAKUHACHI PERFORMANCE CONCERT, 13 December, Melbourne. This inaugural Shakuhachi Performance Concert presents winning compositions from USA, Australia and Japan performed by Australia's leading Shakuhachi masters and instrumentalists. TIME: 3.30pm VENUE: Melba Hall, University of Melbourne. Book online at www.shakuhachichambermusic.net or by calling 9739-7340 (reserved seating)

THE 18TH NEW ZEALAND ASIAN STUDIES SOCIETY INTERNATIONAL CONFERENCE 2009, Wellington, 6-8 July, 2009. This will be an open, multidisciplinary conference. Participants are invited to submit panel or paper proposals presenting original research on any Asia-related topic. For more information, please the see conference website: http://www.nzasia.org.nz/conference.html Paper abstracts due by 15 March 2009 to the chair of the organising committee: stephen.epstein@vuw.ac.nz

MAJU BERSAMA The Australian Society of Indonesian Language Educators (ASILE) Biennial Conference, Sydney, 14-15 July, 2009. ASILE is now calling for expressions of interest for papers and workshops at the 2009 conference. This is an excellent opportunity to contribute to and participate in a conference with a national audience interested in directions for the future of Indonesian language education. Small teams of presenters working together on projects are also encouraged to register. Any queries, please contact: Andrea Corston phone: (08) 8683 4751; acorston@internode.on.net