Prime Minister's
Economic Advisory Council Chairman C Rangarajan Monday said the
downgrade of the US sovereign rating will negatively impact exports
and moderate capital flows into the country.
"More than the
downgrade, what will be the impact for the rest of the world will be the
slow pace of recovery in the US," he said in a statement.
"In the
first half of the current calender year, the growth rate in the USA was 1.5
percent. Perhaps for the year as a whole, other growth rates may not be
much higher than that. That's a very, very slow pace of recovery and that
has implications for the world in terms of capital flows, in terms of trade
flow," he said.
Even Finance Minister Pranab Mukherjee said
the downgrade of the US sovereign rating will have some implications
on India, but added there was no need to press the panic button as the
fundamentals of the economy remains strong.
"The recent
developments in the US and the eurozone have injected certain
uncertainty in global markets. These developments could have some
impact on India. But as India's growth story is intact and its
fundamentals strong, we are in a better position than many other nations
to manage the challenge," Mukherjee told reporters outside Parliament
House.
Mukherjee said there could be "some impact" on
capital and trade flows, "but as India's growth story is strong, we could
see FIIs viewing India as an attractive investment destination even if
there is any temporary outflow".
Ratings agency Standard and
Poor's on Friday lowered the sovereign credit rating of the US to AA+
from AAA, a development which raises concerns that investors will lose
confidence in the American economy.
Justifying its rating, S&P
said that predictability about US policymaking and political institutions
has weakened at a time of fiscal challenge. A US Treasury official,
however, said the decision of S&P was flawed. |