Sub-prime crisis to further slowdown Indian exports to US

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New Delhi, Feb 28 (UNI) Notwithstanding relative insulation of Indian banks and financial institutions to the sub-prime crisis in the US and Europe, Economic Survey today projected a further slowdown in the country's exports to the United States.

As against an export target of 160 billion dollar in the current fiscal, India's exports in first 9 months were just over 111 billion dollar.

Stating that the US economy is expected to slowdown this year due to sub-prime crisis, the survey said it will impact Indian exports to the US which have already been slowing in 2006 and 2007.

''A further slowdown may be unavoidable, but may be relatively modest,'' the survey for 2007-08 added.

The survey attributed relative insulation of Indian banks and financial institutions to their lesser exposure to sub-prime and related assets in mature markets in developed countries such as the US India's gradual approach to financial sector reforms and appropriate safeguards to ensure stability has also played a positive role in keeping India immune from such shocks.

It said the sub-prime crisis and lowering of interests rate by US and other developed countries has expanded liquidity and this may increase the capital flows into India and other emerging markets.

At the same time, the survey said slower Indian economic growth in the current financial year as compared with the previous two fiscals might temporarily dampen the capital influx but its decline as proportion of the GDP in 2008 is likely to be modest. Overall, the situation of excess inflows is likely to remain, though pressure on reserve accumulation and exchange rate appreciation is likely to ease.

The reduction in excess capital flows from the high levels in 2007 may affect the stock markets in the short term but make the task of monetary management easier, the survey said. Foreign direct investments (FDI) in India in 2006-07 were 23 billion dollar, whereas in the first six months of the current fiscal till September 2007 it had crossed 11 billion dollar.

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