ASIAN ECLIPSE - INDIA AND CHINA IN THE PENUMBRA

Competing explanations of the Asian crisis are clustered around four f actors, acting singly or in conjunction: (i) structural aspects, (ii) macro-economic imbalances, (iii) financial failures, and (iv) self-ful filling or sunspot features. The authors' preference is for the financ ial explanation, though this does not amount to complete disavowal of the responsibility of structural factors in precipitating the crisis. The financial collapse was the logical culmination of an inappropriate financial liberalisation strategy with volatile capital flows acting as a triggering factor. The IMF's misdiagnosis played a part in aggrav ating the crisis and in prolonging its duration. Ever since the outbre ak of the crisis, speculation has been rife about the likelihood of th e contagion spreading and the extent of its possible spread, Policy-ma kers in different countries have been exercised about measures to fore stall the spread to their respective economies. The authors address th ese and related issues with respect to the two Asian giants; India and China.