FM: subprime crisis to hit India

Written by Economy Bureau | New Delhi, Mar 17 | Updated: Mar 18 2008, 05:59am hrs
Finance Minister P Chidambaram on Monday said the fallout of the subprime crisis on the global credit and housing markets would impact India.

When crisis (has) moved from the subprime mortgage market to the housing market, and now the housing market to the credit market, there is impact upon India. There is impact in terms of credit flows and financial flows. But at the moment, I believe that impact is second-order impact and a moderate impact, he said.

Turmoil in the global financial currency markets has started affecting Indian companies and the stock market. While ICICI Bank has lost as much as $264 million up until January due to its exposure in the overseas credit derivatives markets, other banks are also facing significant losses.

Analysts note that the total mark-to-market losses of corporate Indias exposure in the foreign exchange derivatives market could be in the region of $5 billion.

Meanwhile, Chidambaram said Indian stock markets are taking cues from the US and Asian markets, even though the subprime mortgage crisis has only moderately impacted credit and financial flows into the country.

In fact, we now have to track what is happening in Asian markets. Hong Kong, Tokyo and Shanghai open before the Indian market opens. If you watch closely, you will find that what is happening in Asian markets is impacting the Indian stock market, he said.

Chidambaram also said the government would make efforts at achieve economic growth of well above 8% and close to 9% in 2008-09. We have delivered high growth... we will make every effort to maintain growth rate at well over 8% and close to 9% (in 2008-09), he said in the Rajya Sabha debate on the Budget.

The Indian economy has moved on to a higher growth plane, he said. The average growth rate during the four years of the UPA government was 8.7%, the minister said, adding the 11th Five-Year Plan has set a target of average growth rate of 9% and a 10% growth in the terminal year (2011-12).

Growth is imperative. Growth is important. If there is growth, there is chance of inclusive growth. Without growth, there is no chance of inclusive growth, he said.