New Delhi – The global economy is not doing well especially with the European debt crisis and the difficult phase would continue for some more time, World Bank chief economist Kaushik Basu has said.
Basu, who till recently was the chief economic advisor to the Indian government, assumed the new post on Monday.
“It’s not doing well. It’s a very difficult phase, and the difficult phase will live with us for a while,” Basu told the Wall Street Journal on his thoughts about the global economy, in an interview.
According to him, the subprime mortgage crisis of 2007 and 2008 in the US, exposed another problem — the construction of the euro zone.
“This is no one’s fault. The construction of the euro zone is one of the biggest human-made experiments of a system being brought into place. It’s a gigantic experiment. It’s not surprising that some fault lines would show up,” Basu noted.
The persisting European sovereign debt turmoil is hurting the world economy, which is on a fragile recovery path.
“In today’s world, the global economy is becoming one economy. These are problems ? with globalisation, with the construction of Europe ? I think we will have to live with for a year or more. But the world will come out of that and we will get back to growth,” he said.
With sovereign debt spilling over into the financial world, Basu said there is a drying up of credit.
“… It’s also making it very difficult for just doing your business and sending the goods over. Once problems set in ? and you can see this across the world, whether it’s Brazil, India or China ? you rush to amend things. When you do that in a rush, yes, you’re making some blunders as well,” he added.
In response to a query on what framework he was bringing to the World Bank from his India experience, Basu said that he was bringing in something interesting.
“India was my first exposure to hands-on policy. It’s a tumultuous country right now ? politically and economically, lots happening. I was being tossed into about as much hands on policy as one could think of when I took up the Indian job in December 2009.
“That experience, with the professional economist’s training, I feel is really a great combination,” he noted.
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