Euro zone contagion a major worry for India: Montek
'Most important thing that G20 can do for India is to put in place a credible assurance for global financial security'
India's economic woes have not gone out of hand in the wake of the slip in the GDP growth, the lowest in nearly 9 years, but there could be trouble if the Euro zone crisis is not quickly contained and financial stability in Europe restored, a top Indian official said today.
Ahead of the G20 Summit of developed and developing countries being attended by Prime Minister Manmohan Singh among other world leaders, Deputy Chairman in the Planning Commission Montek Singh Ahluwalia said India will be "lucky" this year if it can achieve around 7% growth rate this fiscal.
The country's economic growth rate slipped to 5.3% in the fourth quarter of 2011-12, lowest in nearly 9 years due to poor performance of the manufacturing and farm sectors.
Ways to fix the Euro zone crisis to prevent a contagion effect that could hurt the economies emerging economies like India and China is on the top of the agenda of the G20 leaders who will be meeting in this Mexican coastal resort over the next two days.
Ahluwalia said the general assessment at the ongoing deliberations is that the global economy is "extremely weak" and it could sow the seeds for a second financial crisis in four years if the Euro zone crisis is not handled effectively.
"We have not reached a situation where there is a sudden outflow of funds. We don't need any support from IMF. We are not looking for anything like that," he said.
"We will be lucky to have six-and-a-half per cent to 7% growth which is lower than the long-term target," Ahluwalia, who is the sherpa assisting Prime Minister Singh at the summit, said. The G20 accounts for 80% of the global GDP.
Ahluwalia said most countries have exhausted their"firepower" in tackling the faltering global economy and there is not that much fiscal room now.
"We are fortunate that we are not in a position that we will be looking at any kind of emergency assistance. We are not posing to G20 any specific thing that can be done for India. We are basically saying that most important thing that G20 can do for India is to put in place a credible assurance for global financial security," he said.
"We do not view this as a situation where the Euro zone countries have no option and the entire shortfall is met by the IMF," he said, adding "if they are clear about how to handle the crisis and position themselves giving that signal, it would calm markets".
"It is different matter whether they will get rapid growth, these are two issues, first is whether there would be a banking collapse in Euro zone and flight of capital and deposits flying from one country's banks to other as has happened in Greece.
"I am clear that Europe is capable of giving clear signals that it is going to prevent financial collapse," he added.
About the timeframe to resolve the Eurozone crisis, Ahluwalia said there cannot be any quickfix methods.
"There has to be some fiscal consolidation over a medium term," he said.
Replying to questions, Ahluwalia said Prime Minister Singh's call for focusing on investment in infrastructure as a means of stimulating global growth was finding resonance during the G20 deliberations.
"There is a lot of support coming from developed and developing countries and infrastructure investments are sensible things to do," he added.