Even though India is feeling the pinch of the financial crisis, a leading US expert has said India could benefit the most from this economic meltdown as this offers new opportunities to it.
"There is a sense that the international institutions will be remade to reflect the current balance of power, and that India may be able to turn this crisis into a permanent place at a new high table," said Adam Segal, Maurice R Greenberg Senior Fellow for China Studies at the Council on Foreign Relations, a New York-based think tank.
Notably, for quite some time, India has been demanding its rightful place in international financial institutions like the International Monetary Fund and the World Bank by arguing that they no longer represent the realities of the world and the balance of power in these organizations is tilted more towards the developed countries.
In a policy paper on the current economic crisis and its impact on India, Segal 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."
Segal argued that the Indian financial sector is relatively insulated; the rupee is not fully convertible; and Indian banks did not have significant exposure to subprime loans in the United States. However, its stock market has been badly hit as foreign institutional investors have sold almost $10 billion of their investments in Indian companies to cover losses accrued in their home markets.
Even as there are lot of issues of concern and the Indian economy will be unable to avoid the fallout of a US and European recession, Segal argued there are reasons for optimism about how quickly India could turn the corner.
"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 per cent of its oil, so it will benefit from prices hovering around $70 a barrel as well as from the declining prices of other commodities," he said.
As the G-20 Summit began in Washington on Friday evening with a dinner at White House, Segal said India has two broad objectives from it ensuring that credit begins to flow again as quickly as possible and that the World Bank and IMF invest heavily in large infrastructure projects in developing countries.