Tamil Nadu - Chennai   

Expert predicts recovery after July

CHENNAI: The present and next quarter will be bad for the Indian economy, while the recovery will begin after July 2009, Saumitra Chaudhuri, member, Prime Minister’s Economic Advisory Council, said on Thursday.

Addressing the members of the Confederation of Indian Industry (CII) at an interactive session on ‘Global economic scenario-impact on India,’ he said the global financial meltdown had hit banks, financial institutions and capital market in the U.S. On the other hand, India presented a healthy picture, since it had relied primarily on agriculture.

The Indian banks were insulated from the meltdown. Farm output remained good.

“Like in the past, the financial recession will not last more than six quarters. We have already witnessed a slump for four quarters. The next two quarters will be bad. Commodities, iron ore and meat will run into some difficulties,” he said.

The people had already adjusted their consumption patterns, he said. In the coming days, money would be spent cautiously on market and consumption.

The economy would stabilise during the April-June quarter. From July on, things would change. However, it would not witness a quantum jump.

Since September, there had been a disruption in trade credit, forcing some major industries to put off expansion. Industrialists would be in a position to raise loans from January and February, while it might take more than a year to raise equity capital.

Asked what steps would be taken by the Centre during the intervening period, Dr. Chaudhuri said government and policymakers would like to ensure that the impact was less. The best option, he reckoned, was to keep investing in port, power and road projects.

“The price of petroleum products will not be reduced owing to the weakening of the rupee against the dollar. Till recently, the oil companies were making losses, as the cost was not passed on to the customers,” he said.

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