Onboard Air India One, Sep 24: The Indian government is in no mood to believe that the sub-prime crisis in United States will have any direct impact on the nation. Thanks to the overflowing foreign cash reserves, the regulatory nature of our banking sector and the carefully calibrated, cautious and gradual liberalization policy designed by architects of the economy.
"Our banking system is not directly exposed to any significant extent to what are now called toxic acids," said Montek Singh Ahulwalia, the Deputy Chairman of the Planning Commission to media persons. Montek who is accompanying the Prime Minister, Dr Manmohan Singh, to the United States further said: "I have seen the numbers of the estimated exposure, it is very very small ".
But, he admitted that if this uncertainty continues for long then it will have an indirect fall out on the Indian economy. According to the analysts despite the frantic efforts by the Bush Administration to bail United States out of this crisis, the Wall Street meltdown will be protracted and might spillover into the next calendar year.
While the United States and other Western economies continue to plunge into their respective economic crises, Asian giant India feels that emerging economies can play a vital role in the stabilization of the world economic system.
"BRIC (Brazil, Russia, India and China) can play a vital role in future to shape up the world economy," Montek said. "A cautious approach is needed in the liberalization process but at the same time there is no need for slowing down on this count", he added.
If his assessment on inflation comes true, it would be good news for the middle and lower income groups which are facing back breaking steep pricing for the last few months.
Ahulwalia believes the government is taking various measures to curb inflation and that it will come down to a single digit figure over the next calendar year.
If this happens, it will not only mitigate the miseries of the common man, but could also result in major electoral gains for the Manmohan Singh Government which has been pushed on the back foot on the issue both by the Left and the Right.