Minimal Impact Presaged Of Slowdown In The Us

The impact of the US slowdown on India's exports of merchandise and software is expected to be moderate as the diversification in exports has provided a degree of insulation compared to many emerging markets, the Reserve Bank of India (RBI) said.

Currently, a major part of the software exports is to the US. Infotech companies are diversifying their business to Europe and south-east Asia in order to skip the lull in the US markets.

Nasscom had revised its growth forecast to 40-45 per cent for the current fiscal from the earlier estimate of 52 per cent or around $9.4 billion due to the US slowdown.

Exports by the software industry had jumped by 55 per cent to $6.2 billion in 2000-01 from $4 billion the previous year.

The RBI has also said that new economy sectors have continued to enjoy a competitive edge despite the underlying domestic industrial condition and the global slowdown.

According to the RBI annual report for 2000-01, fast-growing sectors such as software, knowledge-based industries, information technology-enabled services, pharmacology, biotechnology and entertainment services carry the potential of generating increasing returns to scale and sustaining the economy's growth.

These industries have the inherent confidence and the capabilities to expand rapidly and command global leadership.

It has also added that the critical enabling requirement for accelerated growth of these sectors is the expeditious removal of procedural and institutional constraints on production, marketing and international trade.

Though foreign direct investment inflows are expected to be relatively unaffected, the outlook for portfolio flows is mixed. The inflows could be affected by a degree of home bias and recede or additional flows into India could be possible because of readjustment of portfolio among fund managers.

The central bank has added that the recovery of the US economy may be visible only towards the beginning of 2002 with the turnaround starting possibly towards the close of 2001.

It has added that as the major regions of the global economy is experiencing a downturn, the prospects for the emerging market economies remain uncertain.