Sub-prime crisis may hit software industry

Written by Economy Bureau | Kolkata, Sep 29 | Updated: Sep 30 2007, 08:57am hrs
The shadow of the subprime crisis in the US looms large as Indian companies fear a slowdown in the software industry.

The panel of experts that gathered at the Indo-American Chamber of Commerce were of the view that the crisis can be overcome as the US enjoys the advantages of sound capital markets, rising wages and low inflation.

Rakesh Mohan, RBI deputy governor, said: "There has been sustained attention on the sub-prime crisis in the last two months. We really don't know what will transpire. Given the speed at which market corrections are taking place, we have to be watchful. We will need to gather more information and knowledge to see what will actually happen in the future."

"The accommodative monetary policies resulted in sustained low interest rates, lower inflation levels and volatility, encouraging more risk-taking. Many banks set up special investment vehicles off their balance sheets, and hence had to face liquidity problems when the crisis erupted. But they have to make adjustments now," he said.

Michael Owen, US consul general, said increasing wages, sustainable inflation and innovative financial and credit instruments will enable the world economy to post a strong growth in the long term.