The government's approach of proceeding gradually on the road to globalisation has been vindicated, he said. Opening up the economy at a fast pace can be risky as structural weaknesses in the system as well as the underdeveloped financial infrastructure can come under pressure, he said. Low short-term external deficit and a tightly-leashed current-account deficit of less than 2 per cent has given the country necessary cushion to weather the crisis, he added.

Bucknall warned that notwithstanding the immunity, the crisis holds important lessons for India. It is absolutely imperative that the country develop its debt market, he said. A uniform feature in the south-east Asian countries has been that they have all had underdeveloped bond markets, he added. In the US, almost 40-50 per cent of the credit is provided by the bond market, he remarked. It is important that funding sources are diversified, India should attempt to recycle its high domestic savings more efficiently in the economy, he reiterated.

He warned that the country could not to afford to be complacent as relative currency value vis-a-vis the rigitt or the rupiah is no longer a strength as Indian exports are under pressure. In the first quarter of 1998-99, exports from the country amounted to $8 million, which is less by about $ 0.2 million compared to the figure of the first quarter for 1997-98. As a result of dropping exports, the trade gap has widened to $3.8 million dollars in the first quarter of the current year, compared with only $1.3 million in the first quarter of the previous year, Bucknall said.

In the backdrop of the south-east Asian crisis, India should address macro economic issues, on this count, of particular concern is the fiscal deficit which is at 6.1 per cent, he said. Bucknall highlighted that if fiscal deficits of state governments and that of the public sector is aggregated with the central government's deficit, the cumulative figure comes as high as 12 per cent. On this front, the government has to address the issue of reining in food and fertiliser subsidies, he said.

The banking system needs to be strengthened as total NPAs as a proportion of total assets is as high as 17 to 20 per cent for public-sector banks, he said. Nearly 90 per cent of banking activities in the country are undertaken by public-sector banks, he stated.

Another suggestion given was to give priority to creating globally competitive sectors. This was underscored by HSBC Capital Markets India CEO Shaun Browne, who remarked that domestic corporates, who are obsessed with building assets, must now divert their attention towards giving return to shareholders.