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The challenges for a 'lost generation'
Wed, 2 Feb Pre-Open

Egypt's political turmoil. Japan's government debt. Portugal's and Spain's bailout crisis. US'joblessness. China's currency manipulation. India's inflation. There is little chance that a day has passed without you coming across either of these in the past few months. Sporadic reports of higher GDP growth in emerging markets and corporate results may have brought in some temporary cheer. But the near term outlook is far from being rosy in the developed and developing world. Economies and companies are plagued with structural and cyclical risks to their growth and prosperity.

Rising food prices have already wrecked havoc in middle and low income budgets. And crude oil prices at US$ 100 a barrel can only push the developed world's economic recovery further. In addition the likes of China and India may find it increasingly difficult to pay the oil bills. India for instance imports 70% of her crude requirements and is currently sitting on a huge current account deficit.

Problems relating to joblessness may be of immediate concern to the US. But even the fastest growing economies like China and India have to offer gainful employment to millions in the coming decade. Meanwhile rise in per capital income levels needs to keep pace with inflation. Else social and political unrest could add to economic friction.

The IMF has sounded concerns for the generation to come. The world's largest economic think tank believes that 400 m young people would join the global labour force over the next decade. And there is every likelihood that they may not find gainful employment. Structural imbalances in global trade could lead to rising protectionism. With rising economic tensions, the world could see social and political instability within nations. This raises the prospect of a 'lost generation' suffering from worse unemployment and social conditions.

As far as India is concerned, the risks of high unemployment and inflation over the long term are real. The government needs to take measures to arrest these problems at the earliest. Meanwhile companies will also have to factor in the worst case possibilities in their long term plans. Only then will they be able to tide over the challenges that confront their businesses in the coming decade.

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