Opinion is divided on Whether the two bailout packages will get India back on track. Economic think-tank ICRIER maintains growth in the first half of 2009-10 is unlikely to move beyond 4 per cent, making even 6 per cent for the full year a near impossibility. If you assume the biggest fallout since the US-led crisis has been on India Inc’s ability to raise capital for expansion — this has reduced investment and hence GDP growth — the revival of financial markets in the US is critical.
There is some evidence of this with falling Libor rates — spreads on Aaa firms have declined a bit but those on Baa’s have risen, indicating how steep the recovery needed is. Stock markets appear to have priced in the worst and are moving sideways, certainly the downward plunge is stemmed. By June, the US will have seen seven straight quarters of falling consumer demand, something which has never happened in 40 years, prompting some to think a weak recovery could start then. Bad news will continue to pour in — unemployment numbers in the US, negative exports and falling car sales in India, and more — but both US and Indian companies have never been in better shape despite the pummelling they’ve got. That offers some hope.
