Indian economy strong enough to bear global shocks: Reddy

New Delhi, Nov 3 (UNI) Indian economy has enough resilience to absorb the external shocks that may arise on account of Emerging Market Economies (EMEs) in an era of global integration, Reserve Bank of India Governor Yaga Venugopal Reddy said here today.

Citing a number of reasons, he said, under the present circumstances, many conditions are favourable for most Emerging Markets Economies (EMEs) like India to effectively take on the global integration.

''Firstly, they currently enjoy strong global demand for their exports, favourable terms of trade and easy access to external financing. Second, large foreign currency reserves along with reduced external debt as percentage of GDP are cushion factors against any sudden withdrawal by investors in the financial markets,'' Dr Reddy said.

The RBI governor was speaking at a conference on ''Global Risks to Emerging Markets'' here.

The governor warned that large current account deficits and less well-anchored inflation expectations may be vulnerable to global changes.

''In the overall assessment, while global growth has been strong and broadbase, their seem to be some indications of moderation in recent one. There are also perceptions of risks to growth and from the cooling of the housing market in the United States and the potential drainage of liquidity from financial markets,'' Dr Reddy said.

Although global inflation condition have not worsen, concern relating to potential price pressures persist, particularly in the context of firming up of food and metal prices, the uncertainty surrounded international crude prices and monetary overhang.

''While geo political risks continue to caste a shadow, it is necessary to recognise that global risk have not changed significantly in the last few months,'' he said.

In the monetary market, Dr Reddy said, their appeared to be widening expectations that at best interest rates are expected to rise only gradually from now on.

''On the other hand, these revisions in expectations have coincided with falling long term interest rates in the US, the European Union and Japan leading to inversion or flattening of yield curves. Global equity markets have recovered some of those losses suffered in May and June and with those markets that recorded the largest losses gaining the most,'' the RBI chief said.

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