The World Bank report on "Global Financial Crisis: Implications for South Asia" released on Thursday shows that even as India is relatively more exposed to the contagion effects of global financial markets, risks associated with it are cou
ntered by a fundamentally strong macro economy including prudent foreign debt management, high savings rate, solid financial sector health, and a pro-active monetary policy management. These steps will allow India to ride the crisis without destabilizing the financial sector.
ntered by a fundamentally strong macro economy including prudent foreign debt management, high savings rate, solid financial sector health, and a pro-active monetary policy management. These steps will allow India to ride the crisis without destabilizing the financial sector.Further, the report indicated that the main effects of the global financial crisis will be to reduce the availability of funds leading to higher interest rates and lower public and private investment that will hurt growth.
As far as India is concerned, the report said the current account widened sharply from a surplus of more than 2% of GDP in 2004 to a deficit of over 3% in 2008. Moreover, the report indicates that India had made good progress in reducing fiscal deficit between 2003 and 2007.
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