Asian Development Bank (ADB) today cautioned that worsening global financial situation will have severe consequences for emerging economies like India and China.
"This global slump (in US, Euro area and Japan) will have a serious slump on the region's major economies, particularly on India and China" ADB President Haruhiko Kuroda said at a FICCI seminar here.
The ADB chief said that despite signs of stabilisation, "downside risks to growth remain in Asia ... Recovery in the United States, Euro area and Japan remains illusive".
As per latest data, the US economy, after a gap of over three years, contracted by 0.1 per cent for the quarter ending December 2012.
Kuroda said while the US is endeavouring to deal with the problem of fiscal cliff, the inability to Euro area countries to tide over the fiscal problems could undermine the recovery prospects in the coming months.
Referring to India, Kuroda appreciated the recent policy initiatives undertaken by the government and said ADB was maintaining its growth projection for the current fiscal at 5.4 per cent and for 2013-14 at 6.5 per cent.
"India is also taking positive policy measures ... There is no clear evidence of growth recovery in India. Among many factors, the delay in implementing the necessary reforms has hampered India's competitiveness. But we expect that recent government reforms will help steer the economy back to a strong growth," Kuroda said.
The government has recently undertaken a host policy initiatives including hike in FDI limit in various sectors, including retail, deregulating the diesel prices and restricting subsidised LPG cylinders to 9 per family a year.
The Reserve Bank has recently lowered the growth projection for the current fiscal to 5.5 per cent, from 5.8 per cent estimated earlier.