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China, India can help, not save world economy: analysts

business Updated: Jul 26, 2009 10:59 IST
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Fast growing China and India may be important players but the emerging economic giants alone do not have the clout to drag the global economy out of its worst slump since the 1930s, analysts say.

China, ranked the world's third largest economy after the United States and Japan, grew 7.9 per cent in the second quarter this year while India expanded 5.8 per cent in the three months to March.

Chinese and Indian demand has largely kept raw material prices afloat this year -- a key plus for exporting countries such as Australia and Brazil -- while also offering hope against the prevailing gloom.

The two countries "send out a positive message at a time when the trend is dark and this can help reassure the markets," said Michel Fouquin, international affairs analyst in Paris.

But beyond this psychological comfort, China and India have only a marginal impact on the wider global economy because they are exporters with limited domestic demand -- ultimately, they are relying on the developed world to recover first before they too can move ahead once more.

"I'm much less convinced that either China or India can (provide) a significant boost to other economies," said Eswar Prasad of Cornell University.

"Both can provide an indirect boost by maintaining domestic demand and providing a sense of confidence to the world economy but their contribution to the world economy is going to remain modest," Prasad said.