India economy likely to grow by 3.8-3.9% in H1 2009 - economist

06 February 2009 15:56  [Source: ICIS news]

NEW DELHI (ICIS news)--The Indian economy is likely to grow by only 3.8-3.9% in the first half of 2009, warned an economist on Friday.

“The downturn of the Indian economy is upon us and the situation has been aggravated by the global downturn,” said Rajiv Kumar, director and CEO of the Indian Council for Research on International Economic Relations (ICRIER) at the Plastindia 2009 International Conference.

Exports are in negative territory since October and imports are also declining, which says that the domestic economy is slowing, he added.

“I would like to dispel the myth that India is not connected with the world economy. Indian economic performance has been tied to global performance from 1980-81,” he said.

“In 1990-91 the external sector was less than 20% of the Indian GDP. It has now grown to 50%. India is truly integrated and policy makers need to look at the global context more deeply,” he added.

On the global economy, Kumar said a recovery was not likely until 2010.

“And then too, it could be shallow. Some people talk of a ‘V’ shaped recovery but that looks unrealistic,” he said.

Kumar highlighted that a series of stimulus packages announced around the world, totalling $4,600bn, might not be enough to take care of the de-leveraging that has taken place in the financial world. It is estimated that around $30,000bn of liquidity has been pulled out of the system, he said.

Kumar stressed that it was time for India and China to boost domestic demand.

But he cautioned that many companies had not factored in a significant slowdown in China.

“Whether industrial capacity created in China for external demand can be turned to domestic demand is a question. Sometimes this is not a seamless movement,” he said.

The conference, organised by the Plastindia Foundation, concludes on Saturday.

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By: Malini Hariharan
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