Indian officials aired caution that things would worsen if the eurozone crisis is not resolved first and financial stability is restored in Europe.
Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission, who is Singh's principal interlocutor at the G-20 Summit said there was adequate fiscal room to respond to the earlier crisis but this time things looked bleak. "I don't know if it will be manageable this time," he said.
"Emerging markets won't be spared when there is a big global crisis. The Indian economy has slowed down because of the global problems besides domestic ones that need to be addressed urgently," Ahluwalia further said. He added India would be lucky if it could see a growth rate between 6.5 and 7 per cent this fiscal.
Ahluwalia, however, was optimistic that the results of the latest Greek parliamentary elections could stabilise markets for a while for the victory of the pro-bail out forces in the European state could see it stay in the eurozone.
Rubbishing short-term solutions to the problem, Ahluwalia said there was nothing to worry over the fact that India currently has a short-term debt of $137 billion. He said such outflows would be met by similar inflows and that the country has adequate reserves to meet the debt and there was no need to seek support from the IMF. "Banks in a country like India, which was witnessing growth in the range of 6-7 per cent, would always be happy in lending money," the interlocutor said. India's economic growth rate had slipped to a nine-year-low of 5.3 per cent in the fourth quarter of 2011-12.
On the role of the eurozone countries to deal with the crisis, Ahluwalia said: "If the eurozone countries are clear about how to handle the crisis and position themselves accordingly, it would surely calm markets". He added: "Whether they will see a rapid growth is a different thing. We need to watch whether there is a banking collapse in store for eurozone leading to flight of capital and deposits from one country's banks to another, as has been the case with Greece." Saying Europe was capable to prevent a financial collapse, Ahluwalia said Prime Minister Singh's call for focusing on investment in infrastructure to encourage global growth was gaining support.
PM may meet Obama
The Indian Prime Minister would start his mission G-20 by meeting BRICS heads of state of Brazil, Russia, China and South Africa. India is the current chair of the grouping. There is also a possibility of Singh meeting US President Barack Obama on the sidelines of the G-20 Summit. "Though nothing has been fixed, but there could be a sideline meeting," said Foreign Secretary Ranjan Mathai. The two leaders had agreed to join hands at the Mexican summit to address the global crisis. Singh would also meet other world leaders, including those from Mexico, Canada, Germany, Britain and France, during the two-day summit.