Finance Minister P Chidambaram has said the US financial crisis may affect India to the extent that its economic growth could come down to 8.5 per cent in the next fiscal against the earlier estimates of 8.9 per cent.

Participating in a debate at the World Economic Forum meeting here, Mr Chidambaram said the US economic slowdown would impact the Indian economy as far as its exports were concerned.

The Finance Minister said economic growth may slow down to 8.5 per cent against earlier projections of 8.9 per cent for 2008-09, impacted by exports getting hit by sub-prime mortgage crisis in the United States.

Though India’s exports continue to grow by healthy 22 per cent, many of the labour intensive sectors like textiles, leather and handicrafts have seen decline in orders. US is the second largest destination for Indian exports.

Lack of laws

Mr Chidambaram attributed the US problems to “lack of regulations and failure of the regulator”. Mr Chidambaram also said Indian economy was largely driven by domestic factors like savings and investments and it was substantially isolated from present global shocks.
Mr Chidambaram said while the US economy was likely to see a slowdown, fears of a deep recession were misplaced.

“The fears about the US going into a deep recession are unfounded, perhaps exaggerated,” he said in an interview with TV channel NDTV Profit.
Expressing surprise on the “extreme pessimism”, he said a number of people believed that the US would bounce back in about two to three quarters.