By Dipankar De Sarkar, IANS
Davos (Switzerland) : Commerce and Industry Minister Kamal Nath said Wednesday that the world was faced with imminent recession but India’s domestic consumption-driven growth could prove to be the way out of it.
“Unlike China, India’s growth story is a domestic market driven growth,” Nath told a panel.
His comment came as thousands of business and government leaders began arriving in this snow-clad Swiss mountain resort Wednesday for the annual World Economic Forum (WEF) meetings, looking at India to help relieve the distress of a possible global economic downturn.
An estimated 2,500 participants from 88 countries, including businessmen, politicians and economists, are gathered in this town debating the hot topic of the day – whether the world is facing a temporary downturn or whether it is in throes of a full-fledged economic recession.
Even more important, they are considering the ways out of the troubles – and, despite a stormy two days in Indian and Chinese stock markets, are looking at the two Asian giants to bail them out.
“There is an expectation that the high growth market of India will help the world weather the storm,” said Lee Howell, Head of Asia and Global Agenda at the WEF.
He said India was better placed than China to withstand the worst effects of any economic downturn.
“The reason is that growth in India is driven by domestic consumption, so there is that larger decoupling issue that needs to be taken into account,” he said.
Decoupling, in simple terms, is a debate over how interlinked the global market really is to recent economic developments in the US.
Many economists feel the US sub-prime crisis, where banks lent huge sums in mortgages to less-than-reliable borrowers, followed by a reduction in the availability of credit, will combine to spin the US economy into a temporary downturn at the very least.
And the US being the world’s largest economy whose consumers are crucial to pushing and sustaining growth, such a downturn will affect every country around the world, these economists hold.
Howell said that China, unlike India, was more susceptible to the US financial crisis because it followed the East Asian export-led model of economic growth.