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India is less affected by Global recession
Due to a global recession in demand, the shadow of a very weak market, low earnings, and very catastrophic cashflow conditions have made it difficult for companies to even survive globally. India also faces a difficult situation and may even witness a slowdown, but the nation's economy is nowhere near a recession, P. Chidambaram, Finance Minister recently told the annual Economic Editor's Conference.
Chidambaram said India may experience a moderation in growth rate in the current year to a level between 7-8%. But India would still be the second fastest growing large economy in the world, according to Chidambaram. He promised every possible monetary measure to contain the impact of the global crisis on the domestic economy.
Sectors like manufacturing, communications, trade, agriculture and construction that have been the main drivers of the Indian economy in the past, were likely to see a moderation of growth.
According to Chidambaram, the increasing expenditure in the infrastructure sector is an essential part of the counter cyclical measures that are being contemplated to address the impact of the global slowdown.
He also said that the general outlook continues to be one of cautious optimism on the whole. Merchandise trade data is available for April-September 2008 in the current fiscal. He accepted a deceleration but that was being addressed by diversifying exports to other markets. A growth of 30.9 percent and 38.6 percent has been registered in export and import respectively. For example, during the first quarter of this financial year there has been an increase in the share of India's exports to China, Singapore, the Netherlands and Saudi Arabia.
Interests rates may soften further and also made a case for revisiting reforms to make the economy more competitive, said Chidambaram. RBI's policy is now biased towards stimulating growth, he said. If the inflation rate continues to decline, policy rates may also moderate and the bias in favour of growth may deepen.
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