Friday, September 7, 2007

India Shielded From U.S. Downturn, Other Risks Seen

A small reliance on exports means India''s economy is shielded from a potential U.S. downturn, but growth could be stunted if current market turbulence is the start of a longer-term reversal in global risk appetite.

Other Asian economies, such as South Korea and Malaysia, are more reliant on exports, leaving them vulnerable if the U.S. crisis sparked by rising defaults in subprime mortgages prompts a major slowdown in the world''s biggest economy.

Paradoxically, one of India''s biggest export sectors -- its iconic outsourcing industry -- could even benefit if American firms look to the likes of Infosys Technologies Ltd to cut costs during a downturn, analysts say.

India''s global linkages are much weaker than other emerging economies, Tushar Poddar, an analyst at Goldman Sachs, said in a research report.

Poddar estimates a 1.0 percent cut in U.S. expansion would shave 0.25 percent off India''s growth, which was a cracking 9.3 percent annual rate in the April-June quarter.

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