Industry chambers today expressed optimism that the Indian economy was strong enough to survive the impact of a downgrade of the US credit rating by Standard & Poor’s.
However, they saw situation in the US leading to market volatilities in the short term and, at the same time, impacting India’s exports through slackening demand.
The Federation of Indian Chambers of Commerce and Industry said while the short-term impact would be more obvious in terms of market uncertainties, the long-term effect might be more prolonged, but less obvious.
“On the downside, an uncertain global environment could depress India’s exposure to global markets in terms of exports of goods and services, that make more than a quarter of India’s GDP,” a statement from the federation said.
The Confederation of Indian Industry though agreed the recent crisis was a matter of concern, it felt India was likely to have a stronger rupee against the dollar following the downgrading of the US economy.
“If monetary measures (Q3) are resorted to by the US, then we shall see inflow of funds to India, which has its positive and negative impact,” said CII.
The decline in growth rate in India as compared with its trend growth was not as severe as in other advanced and emerging economies in 2008-09, when the global financial crisis deepened.
“So, going forward, India is expected to be able to maintain a comfortable growth trajectory of 7.5-8 per cent supported by strong domestic demand,” said Salil Bhandari, president, PHD Chamber of Commerce and Industry.
“The information technology industry will feel the heat, as uncertainty and negative sentiments blow across global businesses,” said D S Rawat, secretary general of the Associated Chambers of Commerce and Industry of India, or Assocham.
Assocham’s GDP growth rate projections continue to hover around eight per cent during 2011-12, with a variation of half a percentage point.
The Reserve Bank of India would need to maintain sufficient rupee and foreign currency liquidity to prevent any excessive volatility in local markets, he added.
Notably, India’s foreign currency long-term sovereign credit rating by S&P remained unchanged at “BBB–”, which is the lowest rating in the investment grade.
