World Economic Forum Annual Meeting 2008 co-chair Kundapur Vaman Kamath, who heads ICICI Bank, the second largest banking company in India, is straightforward in his response to what is the overarching feeling at Davos among the financial community. ?Fear,? says Kamath candidly.
As the Societe Generale crisis added yet another twist to the ongoing story on the global economic crisis, Davos woke up to the reality that beyond the rhetoric of crises and how resilient the United States economy was, heads would have to be put together to find out strategies to tide over the slowdown and prevent it from worsening.
The banking community at Davos is concerned, and the sessions on slowdown, global risk and sovereign funds are witnessing heated discussion and debate. Is the situation in the US a slowdown or is it hurtling towards a recession? The answer, though not entirely obvious, seems to, for the moment, point to the fact that the US economy, sub-prime crisis, credit market crisis and all, is still not in danger of slipping into a negative rate of growth.
This theory found a supporter in finance minister P Chidambaram on Friday, someone who, ironically enough, has been fiercely critical of the failure of regulation in the US and its resultant disastrous impact on the financial markets.
Chidambaram?s argument, articulated amidst some support at a session provocatively titled ?Should we fear slowdowns??, essentially is that the US economy, with more than a little policy stimuli from the government by way of moves like tax rebates, will recover even if, in the immediate context, it did see two or three very tough quarters of slow growth.
The Indian finance minister?s confidence is also based on the innovative nature of the US economy and its basic resilience.