If the current global economic instability precipitates, India has far less ammunition now, than in 2008, to contain its fallout, Indian interlocutors said ahead of the G20 Summit here.
“The world is in deep trouble,” Indian Prime Minister Manmohan Singh told journalists, soon after landing at the San Jose del Cabo International Airport via Frankfurt. “Hope the G20 fill come up with constructive proposals to get the world out of the crisis,” he added.
“It is a more challenging crisis in many ways. I wouldn’t say at the moment it is more serious, since we don’t know if it will be managed or not,” Planning Commission Deputy Chairman Montek Singh Ahluwalia said.
“In the first crisis, there was enough fiscal room to respond. There isn’t enough fiscal room to respond now,” he added, comparing the situation in 2008, when the crisis started, with the state of play now when it has threatened to resurface with far more damaging implications.
“When there is a big global crisis, emerging markets are not left unaffected,” he said. According to him the main reason for India’s slowdown were the result of what was happening across the globe. But he conceded that there were domestic problems as well that needed to be addressed.
“We will be lucky this year if we are between 6.5 percent and 7 percent,” he said on the growth rate he expected for the Indian economy for the current fiscal.
Ahluwalia, who is Prime Minister Manmohan Singh’s principal interlocutor at the G20 Summit, said the outcome of the Greece parliamentary elections – which could help the country stay in the Eurozone and induce reforms – may calm the markets a little bit.
But the situation demanded much more and that there could not be any short-term solutions. “My view is this slowdown cannot be handled by a quick-fix, ‘Lets speed up expenditure’ kind of balancing.”
The plan panel deputy chair also did not see much of a problem on account of the fact that India has a short-term debt of $137 billion that it has to repay, arguing such outflows will be met by similar inflows. He also said the country also had enough reserves to service the debt, adding that for an economy like India’s, which was growing at around 6-7 percent, bankers would only be happy to lend money.
Manmohan Singh, who arrived in this Mexican resort town Sunday, hoped that the G20 Summit would manage to find meaningful solutions to how to arrest the current global economic turmoil and restore growth.
He will start his engagements Monday with a meeting he is hosting for the BRICS leaders — Brazilian President Dilma Rousseff, Russian President Vladimir Putin, Chinese Premier Wen Jiabao and South African President Jacob Zuma.