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“U.S. financial collapse won’t hurt India”

CHENNAI: The failure of the U.S. financial system and the financial stress experienced by the developed world may not have much impact on India’s growth, C. Rangarajan, Rajya Sabha member and former Chairman of Economic Advisory Council, said on Wednesday.

Addressing the 98th Annual General Meeting of the Southern India Chamber of Commerce and Industry (SICCI) here, he said: “If these developed countries come under financial strain, maintaining the export growth for the current year will be difficult. There is a possibility of even the IT sector witnessing an adverse impact. The capital flow will diminish. The ability of Indian firms to raise funds abroad will be affected…India’s growth will not be affected much, as it is largely determined by the domestic factor.”

Dr. Rangarajan said India would end the current year with a 7.7 per cent growth, as against 9 per cent achieved last year, owing to the higher domestic savings and gross investment. Furthermore, India’s growth was driven both by consumption and investment. He pointed out that up to July, exports were good.

“It is not a low growth rate. Last year’s growth of 9.9 per cent comprised 4 per cent of the agriculture sector. Even if we lower the agriculture growth to 2.5 per cent, as we can not maintain 4 per cent every year, the manufacturing sector will grow at 7.5 per cent, and some sectors like automobile will be affected. Even then, it is in conformity with the growth. All in all, growth in the current year can be reasonable, though the rate will be 1.5 per cent lower than the previous year,” he said.

SICCI president M. Balasubramanian said the developments in Singur should serve as a wakeup call for the Indian businessmen to consider several factors before investing in any State, where the climate is not conducive for investment. He urged the State government to tide over the power crisis on a war footing.

Dr. Rangarajan distributed awards to the best student in agriculture (Annamalai University), economic journalism (Annamalai University), commerce (Madras University), economics (Madras School of Economics), financial economics (Madras School of Economics), computer science (Anna University) and postgraduate management (Bharathidasan Institute of Management).

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