US economy will bounce back, says Chidambaram news
25 January 2008

Mumbai: India expects the US economy to bounce back despite the current slowdown following the financial market turmoil land the subprime mortgage crisis.

A slowdown in the US economy would, however, have an impact on global trade, including India's exports, finance minister P Chidambaram said at the World Economic Forum in Davos.

"I think the US economy may bounce back and there is no conclusive evidence of recession in that economy. However, if there is slowdown in the US, Europe and other parts of the world, it will affect our exports," Chidambaram told a WEF session to discuss the effects of a possible economic slowdown.

"Our exports to the US are significant, but not so significant that we will be gravely affected," he said.

India runs a trade surplus with the US, which is in the middle of a financial market crisis caused by huge defaults in subprime mortgage credit.

Chidambaram said there has so far been no direct effect of the US financial market crisis on India.

"We did not suffer any first order effect. But we anticipate that there will be some second order impact," he said, adding, "long-term effects of the crisis spreading from one market to the other (will) have to be carefully measured and responded appropriately."

Chidambaram said the crisis in the Indian stock market, which saw a sharp plunge earlier this week on global concerns, would "pass over in a few days."

"At the moment, since there is such a deep uncertainty, investors are hit by a sense of apprehension and that is why they are selling," he said.

The 75 basis point interest rate cut by the US Federal Reserve, however, has helped buoy investor sentiment in India, he pointed out.


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US economy will bounce back, says Chidambaram