There is a growing consensus that 2009 will be an awful year for the global economy. The World Bank said on 8 March that global output will decline for the first time since World War II.
Developing economies such as China are bound to be hit as demand for their exports falls. India is less dependent on exports than most other Asian economies, which leads to the current optimistic hopes that our economy will get away fairly lightly.
That is unlikely. Besides, capital-deficient India will have to come to grips with the fact that financing growth and the current account deficit will get tougher in the months ahead.
The World Bank points to a few risks. The huge fiscal stimulus programmes in the West will soak up so much money that emerging market borrowers will be crowded out of the global credit and bond markets. The total financing shortfall could be between $270 billion and $700 billion. Remittances by migrant workers could fall. And infrastructure—which is critical for future growth— could be starved of funds.
There are no easy exits.