Karnataka   

‘Slowdown cushioned by domestic demand’

Isher Judge Ahluwalia

Manipal: Chairperson of Indian Council for Research in International Economic Relations (ICRIER), New Delhi, Isher Judge Ahluwalia, said on Tuesday that it was necessary to strike a reasonable balance between financial openness that supports innovation and growth while implementing regulations and effective supervision that limits the potential risk of financial excess.

She was delivering the keynote address at the national seminar on “Next stage of India’s economic growth – redefining role of banking and financial institutions”, organised by the T.A. Pai Management (TAPMI) here.

Dr. Ahluwalia said that even before the impact of global economic slowdown on India, the sustainability of the over 9 per cent annual growth of GDP for the country was already being challenged by factors such as inadequate and poor-quality infrastructure, scarcity of skills, a stagnating agricultural sector and a real-estate bubble. The global economic slowdown caught the Indian economy in a vulnerable state, she said.

Although the Indian economy felt the impact of the slowdown through withdrawal of portfolio capital, slackening export demand and financial sector linkages, it was cushioned by domestic demand.

“We need to analyse the linkages carefully so that we draw the right lessons for the role of banks and other financial institutions as India resumes its journey towards high growth rates,” she said.

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