Thursday, October 16, 2008

Slowdown will begin to pinch only in 2009 - R Balakrishnan

The year-long circus in the financial markets is nearing its climax. I am sure the main focus now shifts to the collateral damage that it will cause. Whilst surely the US will go into economic mourning, with a few cronies surviving, we have to start focusing on what it means to us. For India, the economic slowdown is not just this year, but it looks like the year after is going to be worse.

The first impact is the fear of lending. More than a credit squeeze, we are confronted with a liquidity crisis of a severe magnitude. The last few years of India’s growth has been fueled by foreign capital. Domestic money cannot provide the platform for growth.

Now, we are looking at a real deceleration in our economy. Whilst most are downgrading the current year growth to 6% or thereabouts, I am more worried about FY09-10.

It would not surprise me if our GDP growth slows down to 5% or thereabouts in FY09-10. I simply do not see growth happening across sectors. Five per cent may not be a bad thing in the global context, but it would sure be painful to accept.

Now, everyone talks of a sustainable 8-9% growth. For this to happen, infrastructure has to take place. And if in the next election, we are again unfortunate to get a hotchpotch like what is now, then forget growth. For the next phase of growth to come, industry cannot manage on its own. The government has to provide the backbone.

This fiscal cannot see anything happening, as the government moves in to election gear and keeps its guns trained on inflation. To read more, please, visit - The Economic Times

Related Stories:

1) Nobel winner Krugman says world recession likely

2) Many Indian bank customers are panicking and either withdrawing their deposits or spreading them over several banks

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