Link: http://www.merinews.com/catFull.jsp?articleID=147727

DELOITTE INDIA today released - The Deloitte Global Economic Outlook: 4th Quarter 2008, a report published by five Deloitte economists which discusses the historical

 precedent of financial crisis while predicting the future beyond the current economic

 predicaments for India. The report clearly highlights that currently India will face slower growth prospects with analysts predicting a fall of as much as two percentage points over 

the next couple of years.

However in the longer term, the outlook will depend on the government’s ability to invest

in infrastructure and the fundamentals of the Indian economy remain strong and a bounce-back, once set in motion, will be faster than other economies in Europe, North

America and Japan.

Commenting on the report Dr Kalish, Director of Global Economics, Deloitte Research,

said "This report is meant to provide a strategic perspective about the economy for the business community. In the current environment, it is important for companies in both

developed and emerging countries to understand the risks they face and the potential

impact on their business strategies."

Currently the global economy remains at substantial risk, but the speed and size of thevarious governmental rescue efforts bode well for a recovery in the not-too-distant future.

However, more than half of India’s services and merchandise exports go to the US and

the ongoing slowdown in the US economy will likely affect the future growth in India’sexports. Experts predict that US businesses would likely either reduce outsourcing or 

withhold expansion plans. Consequently, BPOs, financial services and other software

exports contributing to about two per cent of India’s GDP are likely to be affected.Industry association National Association of Software and Service Companies

(NASSCOM) has predicted that there is likely to be a significant impact of the global

crisis on the Indian BPO sector. Despite significant Asian growth and India’s strategy tofocus on non-US markets for exports, a slowdown in the US is expected to influence

almost all economies worldwide which will have an eventual cascading impact on the

Indian economy.

Elaborating further Shanto Ghosh, Ph.D. Principal Economist, Deloitte India said "Unlikesome past financial crises, this one resulted in a rapid and massive governmental response

on both sides of the Atlantic. Thus, there are reasons we can be cautiously optimistic

about the medium-term outlook for the global economy. In India too policy response has

 been quick and continuous.

The RBI, in an attempt to ease the liquidity constraints in the economy, reduced the CRR 

rate several times in September and October, reduced the Statutory Liquidity Ratio and

introduced other changes in the quantum of External Commercial Borrowings andforeign institutional investments into the capital markets through participatory notes."

 

As rightly stated in the report The Reserve Bank of India, has cut the repo rate by 50

 basis points to 7.5 per cent with effect November 3. It has also cut CRR, or cash reserve

ratio, by 100 bps in two stages to 5.5 per cent. The first stage of CRR cut would be witheffect October 25 and the second stage would come into effect November 8. The 100-bps

CRR cut will infuse Rs 40,000 crores into the system, the RBI said. The central bank is

also expected to cut SLR to 24 per cent by 100 bps from November 8.

The report offers a long-term view, suggesting impacts in multiple business sectors thusconcluding that in the United States, recapitalisation of banks will help to revive credit

market activity while Eurozone banking consolidation will have a positive long-term

impact on European capital market efficiency and finally the emerging economies of Russia, India, and China, while slowing, will remain important drivers of global growth.