A global slowdown triggered by a potential recession in the United States could put brakes on India's economic march, top government officials said on Thursday.
"If US goes through recession there will be global consequences and India will also have to bear a part of the consequences. I hope the US government will also take measures to stimulate growth and we will also respond by taking necessary steps," Finance Minister P Chidambaram said at the Confederation of Indian Industry's annual Partnership Summit.
His comments came shortly after the Prime Minister's Economic Advisory Council released a report, predicting that the growth of India's gross domestic product would slow to 8.5 per cent in 2008-09 from an estimated 8.9 per cent this fiscal year.
Chairman of the council, C Rangarajan, also expressed concerns over a possible recession in the United States, the world's largest economy and India's biggest trading partner. "In such an event, a decline in business confidence at the general level can combine with a prospective compression of export demand, to cause a significant slowing of the domestic economy," it said.
The council identified power supply and monsoons as the other downside risks in the coming year.
A poor monsoon in the coming may also worsen the food price situation with ripple effects on the general price situation.
"Our current assessment for GDP growth rate in 2007-08 is marginally lower than our previous estimate in July 2007. The main difference stems from lower than expected expansion in manufacturing output and lower growth in the output of energy utilities," it said.
The council also favoured fiscal sops for labour intensive sectors, whose exports have been hit hard by the rising rupee with exports growth projected to fall to 22 per cent in 2007-08 as compared with last year's 26 per cent.
Rangarajan has pitched for offering indirect tax incentives to spur manufacturing sector's growth that has sunk to worrisome levels in recent months.
India's industrial growth rate fell to a disturbing 5.3 per cent in November from a high of 15.8 per cent in the same month last year.