Crisis will have an impact

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: Make no mistake, the global financial crisis will affect the Indian economy by way of shortage of international credit and drying up of portfolios inflows
We now know that the crisis in the US financial system is spreading into Europe, and the prognosis is that the developed countries are set for a painful recession. Therefore, the worry is not about how diversified away from the US our businesses are, but what happens to the globalisation strategies of companies. There are three implications. First, the crisis is in the credit markets, and spreads have widened too much for anyone to be able to afford to borrow in international markets. There is simply no one out there willing to take the risk of lending. Borrowing-based expansion plans of several companies will be impacted. Second, portfolio flows into emerging markets will take quite a while to resume. As institutional investors re-look their investment strategies, and hedge funds brace for redemptions, there will be very little global money seeking markets like India. Third, our large projects will face a setback due to lack of funding. The missed opportunity of enabling foreign investment in infrastructure and other capita-intensive sectors will hurt. Just as our expanding businesses have exhausted their internal resources, and have begun to consider borrowing, the markets for long-term debt have dried up.