Press Trust of India
WASHINGTON, Nov 16: The financial meltdown will not spare any sector of the economy, but on the brighter side recovery could be just six to nine months
away, Finance Minister P Chidambaram has said.
"There will be some slowdown in every sector... but monetary measures, counter-cyclical measures and enlightened measures by the companies themselves can get over this painful period of adjustments and in about 6-9 months we should be back to the growth rate," he told a news channel in an interview.
India has been growing by 9 per cent and above for four straight years, but various estimates suggest that the impact of the economic crisis could shave off anywhere between 1 to 2 percentage points.
"We are not revising it (GDP forecast) upwards or downwards. It could be anywhere between 7-8 per cent... The only other large country recording such growth will be China," Chidambaram said.
Commenting on the decline in inflation to single digit -- 8.98 per cent -- after five months, he said, "I don't think we should get too excited about the single digit inflation as it is still close to 9 per cent, much above our tolerance level...
"We would like the inflation to come down. We hope it will happen in the next few weeks, so I think we are jumping the gun when we are talking about a rate cut."
As regards the impact of slowdown on India Inc, he said, "Bottom lines in the profit and loss account will indeed be affected but it doesn't mean that something dramatic has happened in the Indian economy."
Stressing that India is still an attractive destination for foreign investors, he said the country's policy stance has attracted significant foreign direct investment as well as portfolio investment in the last four years.
On the robustness of the Indian economy, Chidambaram said, "When I say that the fundamentals of our economy are strong, I mean that companies like Tata Steel is basically a strong steel producing company and Infosys and Wipro are basically very strong player in the software market."
Our agriculture is producing enough to feed 1.1 billion people of the country. They are not affected by what is happening in rest of the world."
Referring to the outcome of the G-20 meeting, he said the troika of Brazil, the UK and other country have been asked to coordinate and they have
promised to expand the financial stability forum and work on more governance reform of the International Monetary Fund.
Ruling out the possibility of another Bretton Woods agreement, the minister said developing countries would be given greater representation and voice.
However, he added, "we still think that developing countries are under represented and therefore they should be given more representation and more voice, which means some of other countries will have to have a hair cut."
On the protectionist tendencies of the developed countries, Chidambaram said the G-20 declaration said no one would be allowed to take protectionist measures as free flow of goods, capital and services is the answer to the current crisis.
As free trade is a powerful countercyclical measure in an economic downturn, he said, efforts should be made for successful conclusion of Doha development round of the WTO.
On convergence of the accounting standards, Chidambaram said there is a broad agreement on common accounting standards among different countries and the standard setting board would get together to work them out.