Friday, February 01, 2008

Will Wall Street's Flu Make India Sneeze?

From Tehelka --
As the fear of recession grows in the US, VISI TILAK, SHANTANU GUHA RAY and VIVEK SINHA examine the possible impact it will have on our economy

AN EARTHQUAKE with a magnitude of over 8 on the global economy’s equivalent of the Richter scale, a huge ebb in the largest economic ocean of them all — can a tsunami that could engulf most economies, wipe out many minnows and seriously damage others, be far behind?

As uncertainty grips the world, and the US economy flounders between the Scylla of the sub-prime crisis and the Charybdis of a credit crunch, economists and political leaders around the globe have been providing a plenitude of opinions, united only on one thing: everyone agrees a big storm is coming. Where they differ is on the intensity, the toll it will extract and which economies, if any, will be able to provide a safe port.

Already weakened by the dollar in decline, the sub-prime crisis and the credit market downturn hit the US amidships. While it’s too early to tell whether this collision was of the Titanic iceberg variety or whether the battered US economy will limp back to recovery, what is definite is the palpable list.

Consider just one comment from Bloomberg News: “US corporate profits are in a recession and the entire economy may not be far behind.” Hence the rushed repair job carried out by the Federal Reserve (75 basis points cut in interest rates) and the Bush Administration (a $156 billion stimulus package).

The result: Emerging markets, which, by definition, are provided ballast by the consumerist czar of the economic world, are bound to be buffeted about. The question is, by how much? More important, will the internal buoyancy in the Indian economy be enough to offset the global tempest unleashed by the US in crisis?

Read the full article at --

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