Indian finance academic moots world energy fund

Reducing financial volatility, fostering employment growth and sustainable environment, restructuring the pension system, refocusing on organic agriculture, establishing fiscal discipline and reorganising the role of IMF are the key challenges we are faced with today, said Prof. J.D. Agarwal.

Professor of Finance and the Chairman of the India Institute of Finance was delivering the keynote address at the business leaders summit organised by CIMA Sri Lanka in Colombo last week.

Explaining the global financial crisis Prof Agarwal said that too much of debt had led the US financial crisis, as US citizens were living on future income, on credit cards and mortgaged houses. The financial institutions were too big to fall and strong financial institutions did not support the crisis and eventually the US government had to intervene. The failure of the regulatory system is another reason for the crisis. US and EU had a strong regulatory framework, but too much freedom was given to the private sector and financial institutions.

To salvage the financial system they had to offer huge financial bailout packages. The US has given over $ 1 trillion packages going against their own free market economic theories.

The economies were pushed to a recession and liquidated labour, companies and banks. The bailout packages have created negative impacts, deflation increased and too much of liquidity in financial institutions.These negative impacts are still there. Today the west is abandoning free market principles to save the free market system.

Prof.Agarwal said that the volatility of oil price is one of the main destabilising factors in the global economy. Money laundering, issues in the financial market and real estates create other problems in the global economy. The global money laundering amounts to over US$ 2 trillion annually. Real estate has been one of the common and simple modes of money laundering.

Sustainable environment and development is a major concern today. We have to find the proper combination of energy mix and develop solar and bio fuel. A world energy fund should be created to provide technology for green energy and promote bio fuel.

Financial discipline is another vital need as the financial system is very complex today. IMF should be decentralised by setting up regional headquarters, he said.

Referring to the role of the business leaders Prof.Agarwal said that the business leaders should realise that the prosperity of the business organisations depend upon the prosperity of the people and other sectors of the economy. Business leaders need a singular vision and mission to give the stakeholders what they need. This is what we often ignore. Business leader concentrate on high productivity, profitability, expansion and maximising market share and wealth and finally their bonuses and remunerations.

This is not sustainable as one had witnessed at the Wall Street crash.

Business leaders ignore innovations, macro and global economic environment, business ethics and socially desired corporate governance. Most of the stakeholders need pride and hope, wealth and power and dignity and respect, he said.

(GW)