New Delhi, November 24
“India’s economic growth outlook is fairly robust even as the global recession deepens,” the finance ministry said today, highlighting the strength of local consumer spending. The macro-economic impact of the global financial turmoil has been muted due to the overall strength of domestic demand, the ministry said in a report released ahead of the Economic Editors Conference here.
“India does not face recession despite the financial meltdown globally. India is nowhere near recession,” finance minister P. Chidambaram said.
“Recession means two successive quarters of contraction. We are nowhere near it,” he said. “There will be a slowdown, but we will remain the second fastest-growing economy in the world,” he added.
“Brace for slowdown in growth,” Chidambaram said, but sounded a word of optimism, saying India would return to the growth trajectory of 9 per cent once the financial conditions stabilised.
“The fundamentals of the Indian economy have been strong and continue to be strong,” the finance minister said. The economy would grow at 9 per cent next year as consumers spend more on houses and automobiles, he explained.
“The growth estimate for the first quarter of 2008-09 is 7.9 per cent and the second quarter will, undoubtedly, show high positive growth,” he said. The minister said “RBI has a scope to cut borrowing costs further as inflation approaches a level we can live
with.”
“If the rate of inflation continues to decline, the policy rates may also moderate and the bias in favou of growth may deepen,”Chidambaram said while inaugurating the conference.
“The positive impact may get reflected through a moderation in inflation, improving corporate profitability through input cost reductions and increasing their internal accruals,” the finance ministry said in its report today.
“India has, if I may say, weathered the crisis, we paid a price in terms of inflation, but we still recorded high growth. I hope that the worst is over,” he said.
While domestic consumption and investment have been the main drivers of growth, GDP growth could get moderated because of slowing growth of exports, the ministry’s report said.
Chidambaram said the government’s strategy was to boost domestic demand to compensate for the slowdown in exports.
The finance minister said steps must be taken, especially in the financial sector, to make the country’s economy more competitive.
