Monday, 24 November 2008

India business, politics confront global slowdown

NEW DELHI (Reuters) - India has seen 9 percent-plus economic growth for the past three years and many thought it would remain relatively immune to the global financial crisis and the subsequent slowdown.

Earlier self-assurance that India's domestic-driven economy would ride out a storm in global financial markets has dwindled as foreign investors rushed to pull out their money, credit markets ground to a halt and a business boom ran out of steam.

The stock market has tumbled by more than half this year, the rupee is at record lows and all the signs now point to a sharper slowdown than most were anticipating.

Highlighting the speed at which things have changed, Citigroup has twice cut its growth forecasts for India in the space of a month. It now sees growth in 2008/09 at 6.8 percent even with aggressive interest rates cuts.

"Unfortunately, over the past few weeks, incremental data both on the domestic and global front has been worse than anticipated. At this juncture, data points to a marked slowdown in consumption and investment," the bank's analysts said

Corporate expansion plans, capital raising and partial privatizations by the government have all had to go on hold as investors, foreign and domestic, have run scared before the storm which has ripped through financial markets worldwide.

Reuters is holding its third annual India Investment Summit on November 24-26 to examine what the slowdown means for outsourcing, mergers and acquisitions, and for national elections due by May of next year.

Prime Minister Manmohan Singh said on Friday the government would spare no policy tool to deal with the crisis, be it fiscal, monetary, exchange rate or public investment, to give industry confidence.

"All will be deployed to ensure an environment conducive to the growth of enterprise and encouragement of the spirit of adventure and enterprise," Singh said.

Politicians too face a tough year, with national elections due in early 2009 after a difficult 12 months, first of soaring inflation and then of global economic turmoil.

As part of the summit, opposition politician Arun Shourie has already told Reuters India needs to restore confidence by helping struggling industries, boosting infrastructure spending and dramatically improving the country's governance.

Shourie, privatization minister in the previous Bharatiya Janata Party-led government, said his party would not be as slow as the present administration to tackle the crisis.

Vedika Bhandarkar, head of investment banking at JP Morgan (JPM.N: Quote, Profile, Research, Stock Buzz) in India, and Manisha Girotra, her counterpart at UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz), will give their views of the outlook for the country's banking industry as M&A activity turns from outbound to inbound, while a view on the prospects for private equity will come from Blackstone country head Akhil Gupta.

Genpact (G.N: Quote, Profile, Research, Stock Buzz) chief executive Pramod Bhasin and senior executives from IBM India (IBM.N: Quote, Profile, Research, Stock Buzz), Wipro (WIPR.BO: Quote, Profile, Research, Stock Buzz) and Infosys BPO, a unit of Infosys Technologies (INFY.BO: Quote, Profile, Research, Stock Buzz), will give the views of the software services and back-office industries as their customers confront the global slowdown.

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