US crisis may bite India, but GDP growth intact

  • HT Correspondent, Hindustan Times, New Delhi
  • |
  • Updated: Aug 08, 2011 03:03 IST

The sovereign debt crisis in the US that sent markets on a tailspin on Friday is likely to affect exports from India and moderate the flow of capital into the country, but the overall economic growth is likely to remain robust at 8.2%. 

The US crisis, alongwith problems in the eurozone, spooked markets worldover, with the benchmark Sensex sliding by 387 points on Friday. With speculation rife over a double-dip recession in the US and its negative impact on Indian businesses, the downgrading of US sovereign rating by Standard and Poor's further underlined those fears over the weekend.

"More than the downgrade what will be the impact for India and the rest of the world will be the slow pace of recovery of the US," C Rangarajan, chairman, Prime Minister's Economic Advisory Council (PMEAC) was quoted as saying by Press Trust of India. "It will have implication for trade flow and capital flow."

"Uncertainty in the world can also result in less capital flow to the developing economies like India. However, I think the US will not lapse into recession. I believe that India's growth will be maintained at 8.2% despite uncertainty in global economy."

India is the 14th-largest creditor to the US with an overall exposure in the world's-largest economy's debt estimated at $41 billion (Rs 184,500 crore). The overall national debt of the US is nearly $15 trillion of which it owes $4.5 trillion to foreign countries holding government debt securities. Markets are expected to remain choppy at least till Tuesday when the US Federal Reserve holds a meeting to take stock of the debt position.

Some of the corporates that have high exposure in the US however, refused to be downcast. The domestic IT industry where US accounts for half the revenues expressed confidence that it would be able to weather the storm even if US were to slide into a recession again.


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