India is unlikely to be hit by global recession due to the economy's inherent resilience, according to Norbert Walter, chief economist of the Deutsche Bank group. It should also not get affected as much as it has a huge home market and does not have an economy largely dependent on exports, said Walter.
India's economy has shown good growth rate historically which compares well to the local Asian markets as well as the international scenario, said the economist. This year, emerging markets are more stronger with larger financial reserves than in the Asian crisis of 1997. Complementing these reserves are flexible exchange rates regimes and a reduction in short term debt, he added.
India's percentage of exports to the gross domestic product (GDP) is 11 per cent which is considerably less than other Asian markets such as Singapore where the share of exports is 126 per cent, while that of Hong Kong is 133 per cent.
More From This Section
"As a result, with the reduction of exports to the US, these economies have felt the effect and their currencies have felt it as well. But for India, this will not be the case as exports are a small percentage," Walter said.
Talking about the recent downgrade of the sovereign rating by Standard & Poor's and Moody's Investor Services, he said, "This is a cyclical phenomenon which is a result of current happening. This is not to be confused with basic structural reforms."
The bank has also made projections about the country's performance with a growth in real GDP of 6.5 per cent and expect the external debt to increase by 18.9 per cent of the GDP. Also the exchange rate should stabilise around 48.5 against the dollar.
Among other projections, the bank's research also says that that while there are chances that the US economy might recover in the latter half of 2001, emerging markets is not likely to improve until the information and the technology sector improves. Also, countries which are facing political tensions are likely to see a slower pace of reforms due to an uncertain political climate, said the report.