Calling for a Marshall Plan in the Arab World - Nouriel Roubini

Nouriel Roubini the Chairman of Roubini Global Economics is of the view that the unrest in the Middle East can have powerful economic implications, particularly as it increases the risk of stagflation, a lethal; combination of slowing growth and sharply rising inflation.

The Unrest in the Middle East have historically been a source of Oil price spikes, which have triggered three of the last five global recessions.

He says further that we don’t know yet whether political contagion in the Middle East will spread to other countries. The turmoil may yet be contained and recede; sending oil prices back to lower levels. But there is a serious chance that the uprisings will spread, destabilizing Bahrain, Algeria, Oman, Jordan, Yemen, and eventually even Saudi Arabia.

The transition from autocracy to democracy in the Middle East is likely to be bumpy and unstable, at best. He suggests a bold new assistance program should be designed for the region, modeled on the Marshall Plan in Western Europe after WWII, or on the support offered to Eastern Europe after the collapse of the Berlin Wall. Financing should come from the International Monetary Fund, the World Bank, the European Bank for Reconstruction and Development, as well as from bilateral support provided by the US, the European Union, China, and the Gulf states. The goal should be to stabilize these countries’ economies as they undertake their delicate political transitions.

For more visit :

http://english.aljazeera.net/indepth/opinion/2011/03/2011315102938604448.html

RBI Policy 17th March 2011

The RBI in the mid-quarter review of monetary policy on March 17, 2011 is expected to raise policy rates by 25 bps each.

The Hike in the policy rates will be despite some moderation in IIP and slowdown in Investment growth as currently Inflation is the main concern for the Central Bank.

Headline Inflation remain at elevated levels and, above that the drivers of inflation have changed from cyclical food articles (vegetable, fruits etc.) to non-food manufacturing articles, reflecting demand pressures in the economy. Additionally commodity prices (esp. Oil) and non-food articles prices have also accelerated on account of external factors.

RBI is likely to raise repo and reverse repo rates by 25bps accompanied with a hawkish statement as Inflation concerns far outweigh the growth concerns.