India is likely to emerge unscathed from the financial crisis sweeping the globe, thanks to the structure of its economy, exports and financial markets, feels a senior official of the IMF.
`India is increasingly a part of the global economy and so it cannot be de-coupled and it does move in sync with rest of the world. In our view, there are a few things going on in India that will likely insulate it from the worst of the effects that would be felt in other countries,` IMF Senior Adviser and Mission Chief for India Kalpana Kochar said in response to a question.
Domestic demand in India is very strong, where you still have investments that are growing very strongly. Consumption, especially of durables, has come off a little bit as interest rate has increased from last year and are beginning to bite, Kochar said in a teleconference.
Investments, which overtook consumption as the key driver of economic growth in 2003-04, has increased 20% from last year`s level.
`But we do think that overall domestic demand growth is strong and that is going to keep growth going,` she added.
``India is plugged into the world trading system but Indian exports have been diversified both in terms of goods and markets. On service exports, we don`t have a whole lot of strong evidence but we do believe that impact could go either way``, Kochar noted.
The official said the prospect is bright for India in terms of economic growth - about 8.75% this year and about 8.25% for the next fiscal year.
`The main driver of growth now is domestic demand, especially on the investment front. We have seen evidence of things slowing down a bit, but there are a lot of fundamental underlying strengths there- strengthened corporate profits and certainly a lot of appetite for investment on the corporate sector side,` Kramer remarked.
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