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How financial stability can be attained in India?

Updated on August 19, 2011

How financial stability can be attained in India? Do you also think India is going wrong with basic policies in regulating foreign investments?

Yes, as I am an Indian, I can say that financial stability can be attained in India, as India needs to do some serious work on financial market, so that we can protect and keep faith of foreign investors in Indian market. We had seen big growth from 2000 to 2008 in stock market and now stock market is down about 40%, so surely we need to see how to protect our market in the future if same situation comes. Don't forget, we and china both were in talks all over the worlds for big fold growth in our stock market and GDP since 1990 and as we are part of world market culture, so surely we have been affected by sudden collapse of market due to sub-prime crisis that began in the summer of 2007 in the United States. Yes, we are affected but, we are not vulnerable as our other counterparts, which are affected from this crisis because we don't follow (RBI) federal bank policy in terms of interest rates which federal bank followed in USA and now we can see the result over there.

So in short, yes, we are affected from current crisis and what our government needs to do at the moment is to bring new actions to keep the faith of investors and customers in our banking industry. We need to improve the quality of financial markets, both expanding regulation and consumer protection. Government needs to do more work on to democratize finance, to make enlightened risk management available to everyone, by subsidizing financial advice and financial market education.

I do not totally believe that foreign investors have no faith in Indian market.

Let's assume that I am a foreign businessman and I have a plenty of money and my primary business is some sort of industry say I-1, say at location L-1. I have invested it in Indian share market as a nice alternate source of income. Of note is that being a big investor, I raise the price, so I have never brought the shares at higher price and when I sell I bring the market down so I don't sell all shares at huge loss but a part of that shares in huge profit and a part in loss.

Now if something goes wrong or my primary business need assistance, I will take the money out, its obvious and logical.

In order to attain financial stability in India, we must first of all understand the very basic cause of this crisis. Like people are recommending the solution for this "If the essential commodities will be sold at constant price in all over India, then financial stability will achieved.

You tell me how it will be achieved? How you can keep the price of all commodities constant for every state and village?

The basic reason is a chain reaction which led to this crisis into or bringing recession because of consumer fear and liquidity crisis.

Again I would like to tell you before suggesting any solution, we need to understand the nature and true colors of the current "credit market and financial crisis. Since the last two months, we are hearing most of the banks are collapsing and financial institutions are going bankrupts. In India, banks have stopped lending people like before. Even if they are lending, they are lending on high interest rates. As banks started failing all over the world, people got worried and alarmed and started withdrawing cash and other valuable assets thinking they would lose their money if their banks especially in India failed. We had seen this trend in recent news that all private sector banks have lost money because of this unnatural and sudden withdrawal of money by consumer and borrowers. This shows that people don't have much faith in our banking system. They didn't even bother to read and see what has really caused this problem? I am very keen to know how many people who had withdrawn money know about sub-prime crisis, which has caused this havoc. How much money of Indian bank has been invested in these sorts of things? And let me clear that this stopping lending money is not because of short of cash avail but because banks are not in a position to judge people and companies paying back capability. Simply borrowers have lost their trust and banks are not ready to throw their money to anyone. So very basic and core reason for this crisis is credit market. All over the world, governments have injected huge cash for credits, but banks are reluctant to lend to people because they are not sure about borrower's repay back capability at this moment.

One solution I would like to share over here. Read it very interesting!!!!

Once upon a time in India, there was a system called rationing system. The government opened up ration shops everywhere, but after the fall of USSR that system collapsed. We just have revived that system. Government will buy the essential commodity and sell them at a constant price everywhere. We never face any crisis pre -94 (or pre reform) we just have to go back there. It also helps in reducing inflation.

How India will achieve financial stability?

See results

India Economic Summit 2008 - Redesigning India's Financial Architecture


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    • soni2006 profile image

      Rajinder Soni 9 years ago from New Delhi, India

      Thanks for agreeing to the idea and visiting this hub Mr. Thakur.

    • profile image

      Rakesh Thakur 9 years ago

      I agree with Mr. William Torpey and soni2006 that corruption evolves when it is hidden but when everything will be transparent, there will no chaos and issues relating to corruption.

    • soni2006 profile image

      Rajinder Soni 9 years ago from New Delhi, India

      Yes you are right Mr. Torpey, corruption cannot flare well in a transparent glass bowl.

    • William F. Torpey profile image

      William F Torpey 9 years ago from South Valley Stream, N.Y.

      I wish there were a magic wand, soni2006, but I think all we can do is keep the pressure on by telling the politicians how we feel, and what we believe, as often as possible in every way possible. Corruption doesn't fare well in a glass bowl.

    • soni2006 profile image

      Rajinder Soni 9 years ago from New Delhi, India

      Thanks Lgali for adding up.

    • Lgali profile image

      Lgali 9 years ago

      very nice advise to govt

    • soni2006 profile image

      Rajinder Soni 9 years ago from New Delhi, India

      Thanks Mr. Torpey for your viewpoint. I think you have studied Indian politics and politicians in great detail. I agree with your idea but please tell me how we can demand honesty and accountability from these bunch of corrupt politicians?

    • William F. Torpey profile image

      William F Torpey 9 years ago from South Valley Stream, N.Y.

      Demanding honesty and accountability of those in positions of power is the only way citizens can impact the economic crisis, soni2006. There's no other way.

    • soni2006 profile image

      Rajinder Soni 9 years ago from New Delhi, India

      Hi Prasanna, this is all about people like you and me. We know what is going on and even FM and PM of India know what is going on and how to handle this situation but I think they are waiting for the right time to hit it, as a hint I would say might be the elections are coming near......... Again, I would say democratizing finance, making enlightened risk management available to everyone, and subsidizing financial advice and financial market education are the best solutions to attain financial stability in India. By the way, thanks for your appreciation of the article and your advice that, "instead putting it here, you should convey your views to the honorable Prime Minister or Finance Minister of India but I do not believe in this, as I think that there were be no impact of conveying my views to them and rather publishing my views over here at hubpages or other blogging sites is the most reasonable approach to tell them what is going on and what the public wants. Again, I will use the most common phrase in this situation, "Lets hope for the best and be ready for the ........"

    • prasannasutrave profile image

      prasannasutrave 9 years ago from mumbai( india )

      Very nice hub and very useful suggestion.

      Instead putting it here you should convey your opinions to FM or PM of India.


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