Deep recession in the developed economies will adversely affect the Indian economy, although a slowdown among developed economies may not have a major impact says C Rangarajan, chairman of the prime minister's economic advisory council.

Mumbai: A deep recession in the developed economies will adversely affect Indian economy, although a slowdown among developed economies may not have a major impact on India, C Rangarajan, chairman of the prime minister's Economic Advisory Council, has said.

"If there is a deep recession in developed economies it will have adverse consequences for the Indian economy," Rangarajan told a news conference.

Pressures from high oil and food prices would also make managing inflation a challenge in 2008-09, he added.

The US downturn has worried investors and policymakers and concerns have also surfaced that it was spreading to the 15-nation euro zone economy as well.

 "The Indian economy is much less dependent on the external markets than the Chinese economy," the panel said in its review of the economy.

"While some export demand compression is likely to put an additional burden on our exports of goods and services, it is unlikely to be large enough to significantly depress growth. However, the flip side to this is that the pressure on prices of oil, food and other raw materials is likely to continue, making inflation management in 2008-09 quite challenging," the report said.

The Rangarajan panel had already revised downward economic growth in India to 8.5 per cent for fiscal 2008-09 from the over 9 per cent rate projected by the government earlier.

The independent economic think-tank, the Centre for Monitoring Indian Economy (CMIE) had, however, projected a 9.5 per cent growth rate for the economy.

The Rangarajan panel had cited the slowing of manufacturing expansion following several rounds of monetary tightening, and sluggish output growth in power and mining as factors affecting growth.

Finance minister P Chidambaram also told a meeting in Gurgaon that a slowdown in the US may have some impact on India's growth drastic.

"If the US goes into recession there will be global consequences and India will have to bear part of the global consequences," Chidambaram said.

While the government is confident of maintaining growth momentum despite a surge in the value of the rupee against the dollar, record global crude oil prices and rising food prices are posing problems for policymakers.

The inflation rate, which hit a two-year high of 6.69 per cent in January last year, has since softened to a little over 4 per cent and is currently ruling well below the RBI target of 5 per cent.

The report said the headline wholesale price inflation rate should go to a little over 4.0 per cent if domestic fuel prices are revised and remain stable around that level until the end of the fiscal year in March.

The government has far months avoided revising fuel prices, fearing it could lose public support ahead of union and state elections. But is under great pressure to do so now.