Credit crunch - first impact

Now there is method in the madness. The first semblances of a coordinated action by governments across Europe in the form of capital injection and guarantees has managed to stem a run on the banks and restore a level of confidence in the credit markets. However, the much dreaded 'R' word was doing the rounds more often. One commentator said that the number of times the finance minister appears on TV to assure the public and calm negative to near panic sentiments on the bourses is directly proportional to the seriousness of the trouble. Whether after the recent round of monetary policy changes, the FM chooses to appear less often is a moot question. However, the government and the monetary authority cannot absolve themselves of all blame. While the inflation numbers ballooned in the 1st and 2nd quarters of this fiscal, primarily due to external factors - commodity and oil prices, etc - the policy response was to treat inflation with a myopic view as if it were a local problem. Consecutive tightening in the monetary measures have directly, if not wholly, contributed to the liquidity problems facing the economy today. While a capitalist style layoff of 850 employees of Jet Airways hit the struggling airline industry with a promise of more to come, the company's management demonstrated a appalling lack of sensitivity and finesse in a country that is yet to get used to the flip side of capitalism. Not surprisingly, the matter quickly deteriorated into a Bollywood soap, with politicians of all hues joining the drama with sound bites that appeared directed more at building their constituencies for the upcoming elections than at the issues on hand. While Jet and Kingfisher have an axe to grind with the government on the likes of high tax rates for ATF, landing fees, development charges, usage charges et al, the blatant attempt to dramatize the issue was unnecessary and projected the private sector in a poor light. Talk of making profits a private right and losses a public liability. The need of the hour is continued engagement with all the stakeholders to ensure a key industry remains healthy and viable.