India is likely to emerge unscathed from the financial crisis sweeping the globe, thanks to the structure of its economy, exports and financial markets, feels a senior official of the IMF.
"India is increasingly becoming a part of the global economy and so it cannot be de-coupled and it does move in sync with rest of the world... In our view, there are a few things going on in India that will likely insulate it from the worst of the effects that would be felt in other countries," IMF Senior Adviser and Mission Chief for India Kalpana Kochar said in response to a question from PTI.
"Domestic demand in India is very very strong, where you still have investments that is growing very strongly. Consumption, especially of durables, has come off a little bit as interest rate has increased from last year and are beginning to bite," Kochar said in a teleconference.
Investments, which overtook consumption as the key driver of economic growth in 2003-04, have increased 20 per cent from last year's level. "But we do think that overall domestic demand growth is strong and that is going to keep growth going," she added.
"India is plugged into the world trading system but Indian exports have been diversified both in terms of goods and markets... On service exports... we don't have a whole lot of strong evidence but we do believe that impact could go either way, Kochar noted.
"If in fact US companies are looking to cut costs, it could mean they outsource more. So, India could benefit from that," Kochar maintained. "Overall in the spectrum of countries that are likely to be affected by this crisis, India is probably a bit further down," she added.
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