‘Not possible to insulate Indian economy from global slowdown'

The Statue of Liberty seems rather worried as the United States (US) national debt crosses 20 per cent of the entire world's combined gross domestic product (GDP), said Mr Rohit Patesaria, Assistant Vice-President, (Finance and Commercial), Falcon Tyres Ltd.

Delivering the Business Line Club lecture ‘Future of capital market', sponsored by Syndicate Bank, for the students of GSSS Institute of Management Studies, Mysore, he remarked that India's growth story may continue to be strong due to our ever growing and prospering middle-class.

However, he said, there is also cause for concern as the Indian stock markets have suffered huge losses, the GDP growth has slowed down and the balance of trade continues to be negative.

2008 recession

Speaking about the global recession in 2008, he noted that it had minimal impact on Indian markets.

However, India was relatively more exposed to the contagion effects of global financial markets through adverse effects on capital flows from portfolio and direct foreign investments, and also through exposure of domestic financial institutions to troubled international financial institutions and to contracts-including derivatives-that had undergone large value changes.

It was evident as there were significant losses in the stock market and a reduction in the flow of foreign capital, he said.

Hence, it was not possible to insulate Indian economy completely from what was happening in the financial systems of the world.

Impact

The Indian banks and financial institutions had not experienced the kinds of losses and write-downs that even venerable banks and financial institutions in the western world had faced.

By and large, India was spared the panic that followed the collapse of banking institutions, such as Fortis in Europe, and Merrill Lynch, Lehman Brothers and Washington Mutual in the US, Mr Patesaria told the students.

Stimulus packages

Many countries announced stimulus packages to combat the crisis with India pumping in $10 billion, while China the highest with $2,046 billion, he said.

Mr Patesaria noted that the interest of foreign institutional investors (FIIs) in India was decreasing as they did not look at India for long term investment. He added that unemployment rate in India may reach 10 per cent.

Mr Shalakran Kurmi, Manager, Syndicate Bank (Regional Office), spoke about ‘SyndVidya', the educational loan product and the interbank mobile payment services launched by his bank.

Dr P. Prakash, Principal, GSSS Institute of Engineering and Technology for Women, also spoke.

Dr. T.P. Renuka Murthy, Head, GSSS IMS, was present.

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