| INTRODUCTION | | | | economic literature to treat depression without |
| | | | | increasing demand if supply side is kept unaltered. |
| Whatever the comments trying to lead the public | | | | The market is suffering from deficiency in |
| astray be coming, the entrance of world | | | | demand not because the investors are suffering |
| depression 2008 can not be overlooked since it | | | | from falling profits but the investors are suffering |
| stands well entered in the Indian economy. The | | | | from falling profits because the market is |
| decision regarding closure of Tata’s | | | | suffering from deficiency in demand. Therefore, |
| Jamshedpur motors plant for three days, decision | | | | deficiency in demand should be treated to save |
| of Ashok Leyland to run only for three days a | | | | both the economy and the investors. There are |
| week for coming two months, decreasing interest | | | | four conditions when a depressive trend emerges |
| rates, decrease in CRR, lowered REPO rate, cut in | | | | in an economy. |
| SLR, index of stock market in reverse gear, Rs | | | | |
| 275000/= crores released by the Reserve Bank | | | | (1) When either the rigidity of demand prevents |
| of India (RBI) to help industries and investors etc. | | | | prices from rising to compensate the falling profits |
| are the events which indicate that RBI and the | | | | of producers in case of increasing costs. |
| Government accept the entrance of depression | | | | |
| 2008 in the Indian economy. Among all these | | | | (2) When the demand does not keep pace with |
| events or the actions the Rs 275000/= crores | | | | increasing supply caused by extra production. |
| bailout drew my attention most. The concern and | | | | |
| worry of RBI and the Government over the | | | | (3) When the demand decreases on account of |
| depression are easily understandable to me. But, I | | | | emergence of some factor affecting the total |
| could not understand whether RBI and the | | | | consumption of general mass negatively. |
| Government are worried for the economy or for | | | | |
| the investors and industries of the economy. To | | | | (4) The dumping of goods by some depression |
| my opinion both are the separate things and the | | | | stricken foreign country. |
| economy should be given priority against industry | | | | |
| and investors. | | | | In case of any one or all of the first three |
| THE DEPRESSION 2008 | | | | conditions the demand should be increased to |
| | | | | treat depression. If the fourth condition is the |
| A depression (economic depression) is caused | | | | cause of depression, check on imports would |
| either by the excess of supply or by the lack of | | | | provide fruitful results. The present depression |
| demand. In both the conditions depression should | | | | 2008 in developing countries though emerged |
| be fought against by increasing demand instead of | | | | mostly on account of the fourth condition but due |
| by decreasing supply in market because decrease | | | | to their being abided by the terms of globalization |
| in supply will always bring national income and | | | | they can not adopt the way of checking their |
| employment down while any cut in national | | | | imports. Therefore, the developing economies like |
| income and employment is never acceptable. The | | | | India have no way but to increase demand of |
| present world wide depression has been resulted | | | | general mass to treat the present depression. |
| by both the excess in supply and the deficiency in | | | | Therefore any measure not helping increase in |
| demand. The excess in supply has been | | | | demand like above said bailout can not be proved |
| generated by over production on account of | | | | fruitful to treat the depression. However, a bailout, |
| heavy productive investment in developed | | | | if made to divert flow of funds towards the |
| economies and it came about in developing | | | | hands of ‘demand- |
| economies due to the dumping through | | | | dominating-middle-income-group’ will increase |
| ‘globalization’. The deficiency in demand | | | | the total demand in market by increasing |
| came about due to deficiency in purchasing power | | | | purchasing capacity of this group. Therefore, |
| in the hands of the dominant middle income mass | | | | bailouts should be made but to help the |
| which resulted by high level inequality in national | | | | consumers instead of helping the investors and |
| income distribution in both the economies. I have | | | | industries. Moreover, the investors and industries |
| explained in detail in my article ‘Story behind | | | | also will be helped though indirectly but ultimately if |
| the World Depression 2008’ how the | | | | the demand is raised by raising purchasing |
| depression was generated in developed countries | | | | capacity of the dominating middle income group |
| and how the developing economies have come in | | | | through bailouts because the so raised demand will |
| its grip. My said article ( concluded that the | | | | enable the producers to sell their product at a |
| problem of depression is the problem of increasing | | | | price that keeps their profit preserved. |
| the (effective) demand by increasing the | | | | |
| purchasing capacity of the dominant middle | | | | CONCLUSION AND SUGGESTIONS |
| income group. | | | | |
| | | | | The above discussion concludes that taking |
| SIGNIFICANCE OF THE BAILOUT | | | | measures to save the investors for time being is |
| | | | | not the treatment of the depression but it is only |
| The above said bailout seems to be similar in | | | | the postponement of the situation. To treat the |
| nature as the Wall Street bailout practiced in | | | | depression measures should be taken to increase |
| America. This type of measures taken in | | | | the demand, determined by the purchasing |
| American could not make any dent on the root | | | | capacity of the general mass, through increased |
| causes of there’s depression. The depression | | | | liquidity in their hands as the ‘marginal |
| is still gaining more and more depth in America | | | | propensity to consume’ of general mass in a |
| day by day. Then, how can we expect that the | | | | developing country is sufficiently high. Therefore, |
| measures as taken in America would be proved | | | | the bailouts should be made to help the demand |
| fruitful in India? The monetary help to industries | | | | increase instead of helping the supply be |
| and investors preserves their profit whereby the | | | | preserved. In other words, the horse should be |
| production and employment level is preserved but | | | | made to pull the cart instead of making it to push |
| for the time being only. The root cause of their | | | | cart. Hence, the bailouts should be made but |
| falling profit remains untouched. Therefore, the | | | | utilized to protect income of the general mass |
| bailouts towards helping the investors and | | | | against retrenchment, to provide cheap consumer |
| industries only postpone for some time the cut in | | | | loans and to finance the subsidy schemes |
| production and employment without helping the | | | | launched for the purchase of consumer goods. |
| demand increase. I could find no way mentioned in | | | | |