New Delhi, Feb 10 (UNI) India and Russia should draw a joint game plan along with two other BRIC partners, Brazil and China, for averting the global economic slowdown, which can be triggered by the financial crisis in the US economy, said an industry body.
Industry chamber Assocham's Eco Pulse (AEP) analysis shows that in a run up to visit of Russian Prime Minister, all four countries need to push up the trade within the large number of developing and emerging economies.
The Russian Prime Minister Victor Zubkov is visiting India with a large business delegation for the India-Russia Forum on Trade and Investment.
According to the Assocham estimates, 32 per cent of the BRIC countries total external trade is done with the US and European Union (EU), which are currently facing the high risk of economic slowdown.
Out of this, 13.6 per cent of the trade takes place with the US, while 19 per cent is done with the EU.
Commenting on the analysis, Assocham President Venugopal N Dhoot said among the four BRIC countries, Russia will be maximum exposed to the slowing of the US and the EU economies, as 49 per cent of its bilateral trade is directed towards them.
While its merchandise with the US is only four per cent, the EU accounts for 45 per cent of the trade, Russia being the third largest trading partner of the EU.
While India ranks lowest among the four BRIC nations in terms of a global slowdown risk, Brazil and China may get severely hit with impending deceleration in developed economies as 35 per cent and 30 per cent of their respective external trade are directed towards the US and the EU.
The fast emerging economies of India, Russia, China and Brazil, have high dependence on exports for their growth. The total trade of the BRIC nations amounts to more than 3.4 trillion dollars and is rising at an average rate of 20 per cent.
Even as the size of both Indian as well as Russian economy is close to one trillion dollars and 1.2 trillion dollars, respectively, exports account for 28.5 per cent of Russia's GDP while 11.5 per cent of India's GDP.
The ratio is 12.4 per cent in Brazil while in China, contribution of exports to GDP is as high as 25 per cent, thus promoting the case for strengthening of economic ties between these developing countries.
Mr Dhoot said that the US economy has been showing signs of sluggishness, a crisis triggered by its sub prime market, causing a loss of more than 100 billion dollars. In the fourth quarter of 2007, the US economy grew at an annualised rate of only 0.6 per cent, after growing at 4.9 per cent during the third quarter.
With the slump in the housing market, the forecast for existing-home sales in 2008 has been lowered to 5.38 million from a January forecast of 5.7 million.
The number of people remaining on benefit rolls after drawing an initial week of aid in the US rose by 75,000 to 2.79 million in the week ended January 26.
According to the Federal Reserve Bank, the US consumer borrowing rose by a smaller-than-expected 4.5 billion dollars in December after soaring to 17.04 billion dollars in November.
United Kingdom, where the financial sector accounts for one-fourth of its GDP, has seen fastest slide in the house prices since 1995 with drying up of mortgage credit.
According to Bank of England, new mortgage approvals stood at 73,000 in December, the lowest since May 1995.
In view of these developments, the consumer spending in these nations is expected to decline considerably in the year 2008, which may severely affect the growth prospects of the developing economies like India and Russia.
On the other hand, outlook for the Asian growth prospect is healthy as it is forecast by the IMF to rise by 8.8 per cent in the year 2008, with investment increase of 28 per cent.
''Thus, it is essential for the emerging economies to ensure that the financial turmoil in the developed world do not affect their 'growth sentiment', said the industry chamber in a statement.
Assocham has suggested that the rapidly expanding India and Russia along with other important trading partners, to strengthen their trade ties in order to diversify the external risk arising from global slowdown.
India's trade with Russia stands at four billion dollars. It rose at 9.6 per cent in FY07 as compared to 41 per cent growth in FY06. India's total merchandise exports to Russia were 907.6 million dollars for FY07, rising by 23.81 per cent.
The prime commodities exported by India to Russia are drugs and pharma (270 million dollars), readymade garments (70 million dollars), textiles (39 million dollars), tea (61.27 million dollars), coffee (50 million dollars), tobacco unmanufactured (28.86 million dollars), machine and instruments (43 million dollars), electronic goods (36 million dollars).
The exported of electronic goods, readymade garments and machines incurred maximum growth of 225 per cent, 232 per cent and 48 per cent.
On the other hand, commodities like tobacco and coffee declined by 24 per cent each.
India's total imports from Russia were 2,112.6 million dollars for FY07 growing at a very moderate rate of four per cent.
India mainly imports iron and steel (406 million dollars), non-ferrous metals (274 million dollars), fertiliser (4,314.5 million dollars) and wheat (156 million dollars) from Russia.
The import of iron and steel declined by 28 per cent while fertiliser import was down by three per cent in the fiscal 2007.
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