cyberindian

Why the U.S. Credit Crunch Will Not Affect India

An interesting analysis above especially when the Indian government is pegging the growth at 8% for the year. There are talks of it getting into double digits at some time.
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The dependence of India on the world has significantly increased since the last time the ASEAN crisis shook the south-east asia, but has little or no Impact on India.

Having said that, the production and consumption fuel is available internally to take in a lot of the hit that might arise of the crisis caused by the US credit crunch. No - I'm not stating that India will be immune to this. there will be effects of the same, and the growth could well drop by a percent - percent and a half to around 6 - 6.5%.

What you are seeing in the Sensex is what the credit crunch is all about. with Foriegn investors pulling money out of the markets for the short term, there might be those trends of the sensex falling and catching up. Having said that, very few economies globally can offer a growth of more than 5% on investment overall, and hence India will continue attracting investments.

Current inflation in India is around 7% which can be dangerous. with Oil prices around the peak, the government subsidy on oil close to 50% will come under pressure, further leading to rise in inflation and a probable weaking on the ruppee.

Weakening of the Ruppee will make the Exports more competitive, but capex spends for internal growth from foreign sources will suffer. India is used to that situation for a very long time, so that would not be as alarming.

Overall, most combinations lead to a growth of close to 6% on the pessimistic side