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India likely to recover from financial crisis quickly
By siliconindia
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Wednesday, 19 November 2008, 16:37 IST |
9 Comments
New Delhi: India may be able to recover from the present financial crisis quickly than other nations. "Despite India not emerging unaffected by the global financial crisis, and its long term growth prospectus remaining uncertain, it may be in a better position to bounce back to its potential compared to many other developing economies," said Adam Segal, the Maurice R Greenberg senior fellow for China Studies at the New York-based Council on Foreign Relations, reported Financial Chronicle.
In a policy paper on the present economic crisis and its impact on India, he said, India has been hurt by the global financial crisis, but it may be better positioned for a quick recovery and for future growth than many of the other developing economies as the Indian financial sector is relatively insulated, the rupee is not fully convertible and Indian banks did not have significant exposure to sub-prime loans in the U.S.
However he mentioned that there are a lot of issues of concern and the Indian economy will be unable to avoid the fallout of a U.S. and European recession, some industries are more vulnerable than others.
IT, financial services and real estate are likely to be hit the hardest, although textile and garment sectors will also be affected by lowering exports and rising costs of capital. India's auto industry faces bleak prospects, with rising costs, reduced consumer credit and falling demand. There has also been an intense liquidity crisis in Indian economy.
Specifying India could recover quickly he said, Domestic demand could remain a strong driver of growth, farm income and rural employment are both up and consumers received large tax breaks in this year's budget. India imports 80 percent of its oil, so it will benefit from crude prices hovering at around $70 a barrel as well as from the declining prices of other commodities.
"International institutions such as the IMF and World Bank will be remade to reflect the present balance of power, and that India may be able to turn this crisis into a permanent place at a new high table," he concluded.