B&E: Is there any probability that India might see recession by 2012?
AS: Recession technically means negative GDP growth in two consecutive quarters and nobody really envisages that would happen in India even in the worst case scenario. If there is another global recession, or a second dip, India cannot escape. However, while its growth rates might fall by a few percentage points, it is highly unlikely, given its domestic growth drivers and a well regulated financial system, that it will see negative growth.
B&E: If India faces a recession or dramatic slowdown, do you think that the Indian government is prepared enough to tackle that?
AS: As I said earlier, the trend in the reduction of the public debt ratio has been very encouraging. At the same time, interest rates have been repeatedly raised by RBI. Therefore, unlike advanced countries, India has both fiscal and monetary space to respond to another severe global downturn, although it would be more difficult this time. Also, monetary space is amore than the fiscal space, since the fiscal deficit is coming down more slowly.
B&E: What steps need to be taken globally to tackle such a crisis as it affects all nations?
AS: A discussion on global imbalances is going on in the G20. There are major seven systemically important economies in this premier global forum for international cooperation that individually comprise more than 5% of G20 GDP at either market exchange rates or at PPP. These countries are US, UK, Germany, France, China, Japan and India. All these countries have large imbalances. US and the UK have big current account deficits; and China, Germany and Japan have huge current account surpluses. India has only a 2-3% current account deficit though, a level that can be financed on a sustainable basis over the medium to long term, especially in view of our large hard currency reserves.
AS: Recession technically means negative GDP growth in two consecutive quarters and nobody really envisages that would happen in India even in the worst case scenario. If there is another global recession, or a second dip, India cannot escape. However, while its growth rates might fall by a few percentage points, it is highly unlikely, given its domestic growth drivers and a well regulated financial system, that it will see negative growth.
B&E: If India faces a recession or dramatic slowdown, do you think that the Indian government is prepared enough to tackle that?
AS: As I said earlier, the trend in the reduction of the public debt ratio has been very encouraging. At the same time, interest rates have been repeatedly raised by RBI. Therefore, unlike advanced countries, India has both fiscal and monetary space to respond to another severe global downturn, although it would be more difficult this time. Also, monetary space is amore than the fiscal space, since the fiscal deficit is coming down more slowly.
B&E: What steps need to be taken globally to tackle such a crisis as it affects all nations?
AS: A discussion on global imbalances is going on in the G20. There are major seven systemically important economies in this premier global forum for international cooperation that individually comprise more than 5% of G20 GDP at either market exchange rates or at PPP. These countries are US, UK, Germany, France, China, Japan and India. All these countries have large imbalances. US and the UK have big current account deficits; and China, Germany and Japan have huge current account surpluses. India has only a 2-3% current account deficit though, a level that can be financed on a sustainable basis over the medium to long term, especially in view of our large hard currency reserves.
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