Have we learnt anything from the Asian crisis? : looking at the crisis from the perspective of India

The Asian crisis of 1997-98 represents a forceful manifestation of the weakness of the economics profession, commercial businesses, international financial organisations and the banks in identifying the vulnerability and preventing the economic despair associated with the crisis. This paper attempts to analyse the role of financial structure of an economy in maintaining economic stability and explore the situation where a vulnerable financial structure leads to a crisis. It critically evaluates the causes of the Asian financial crisis of 1997-98 focussing on the crucial trigger factors. The situation in India is then analysed in the backdrop of the Asian crisis lessons. The paper concludes that the financial structure in India is weak and unstable at present as it is going through the process of transformation. But this may not necessarily lead to a crisis as no known trigger factors are apparent at the moment. However, the policy makers should attempt to improve the financial structure in India by removing imbalances already created in the process of financial sector reforms. Otherwise, new trigger factors might emerge to lead the vulnerable situation to a crisis.