‘Global turmoil to have minimal impact on India’

by Dave

Unlike SE Asia’s export-led model of growth, India follows a domestic demand-driven growth strategy that is much more insulated from a prolonged U.S. or European economic downturn.
Business-The Times of India

Despite financial crisis in the US market, India would continue to grow at high rate of 8% to 9% in the next couple of years. Chief economic advisor Arvind Virmani told TOI financial crisis will have a minimal direct impact on Indian economy and it will grow at the projected rate of around 8% in 2008-09 and 9% in 2009-10.

The main reason behind the optimism is correction in the commodity prices in the international market, because of the the slowdown in the global economy. The crude oil prices have already corrected to around $ 100 per barrel from over $ 140 per barrel few weeks back.

Goldman Sachs also felt in the same manner. In a report, it said, “We believe the credit crisis, which reversed the tidal wave of cheap foreign capital over the past few years, will have less of an impact on the economy’s fundamentals.”

If the inflation is brought down to single digit, the government and the RBI can take measures to ensure that liquidity crisis does not affect economy. Virmani said that India’s financial system remained intact even during the present crisis. This, he said would give confidence to the foreign investors, including the non-resident Indians to invest in India.

Goldman Sachs pointed out India’s external sector is holding well and various indicators suggest condition is undercontrol. The financial sector, the report said, remained sound, mortgage are a fraction of total credit and exposure to inflated real estate is small.

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