Coupling Conundrum ; has India Decoupled From the Us? A Fair Answer Will Have to Be Both Yes and No.

Summary

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Has the Indian Economy really decoupled from that of the US? Economists remain divided on the issue. Based on the data for industrial production and GDP growth, some economists said the Indian economy had decoupled from that of the US, but this theory was quickly abandoned when the Indian stock market lost close to 15 per cent from its peak of 21,206 on January 10, 2008 and closed at 18,115 on February 15 following the announcement in the US of a $168- billion (Rs 6,72,000 crore) economic stimulus package last month and a further cut in the Fed rate that brought short-term interest rates in the US down from 5.25 per cent in September 2007 to 3 per cent now. To say the Indian economy has decoupled from the US economy is very simplistic, says Rajesh Mokashi, Executive Director, CARE.

A look at the foreign exchange inflows in the post- liberalisation period bears out Mokashi's scepticism. FIIs have brought in $62 billion (Rs 2,48,000 crore at current rates) and another $40 billion (Rs 1,60,000 crore) has flowed in as FDI. There still exist strong capital market linkages with the outside world. The slowdown in the US will initially impact the financial markets only and then may spill over to the general economy if the problem persists for a longer period, says Naresh Takkar, MD, ICRA.

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Coupling Conundrum ; has India Decoupled From the Us? A Fair Answer Will Have to Be Both Yes and No.

Global investment bank Credit Suisse, in its latest report, has said non-Japan A...

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