Asia's third-largest economy, with its "modest'' current account deficit, played a stabilising role in the international financial sector and had not contributed to global economic imbalances, Reddy said. Asia's third-largest economy, with its "modest'' current account deficit, played a stabilising role in the international financial sector and had not contributed to global economic imbalances, Reddy said. "The current turbulence in financial markets and institutions has raised enquiries about a possible contagion,'' Reddy said. India's "money, government securities and foreign- exchange markets have been stable and, in our view, may not be vulnerable to direct and first-round effects.'' |
Credit markets seized up after the collapse of the US subprime-mortgage market, dragging the world's biggest economy to the brink of a recession. The Organization for Economic Cooperation and Development yesterday raised its estimate of writedowns by global financial firms to as much as $422 billion and said a recovery would take at least a year.
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The squeeze has raised concern the crisis is deepening and spreading to other markets. ICICI Bank, India's second- largest bank, reported last month $264 million in losses tied to the credit crunch.
'Under pressure'
India's economic output and prices are "under pressure'' due to the global financial crisis and higher international prices of energy, food and commodities, Reddy said. Growth in the $906 billion economy slowed for the first time since 2005 in the fiscal year ended March 31, the government estimates.
India's equity market has been volatile in recent months, reflecting overseas trends, Reddy said.
The nation's benchmark share index lost 19.3 percent this year, after gaining 47 per cent in 2007, as overseas funds turned net sellers of local equities. The yield on the benchmark bond due 2017 climbed to a nine-month high today after a report last week showed inflation quickened to the fastest in 3 1/2 years.
Funds based abroad sold Indian equities worth $2.9 billion more than they bought this year, following net purchases worth a record $17.2 billion in 2007, data from the Securities and Exchange Board of India show.
India's current account deficit widened to $5.4 billion in the three months through December, from $4.7 billion in the previous quarter, the central bank data show.
Inflation accelerated to 7.41 per cent in the last week of March from a year earlier, the fastest since November 2004, the government said April 11. Crude oil rose to a record $114.08 per barrel in New York yesterday.