New Delhi: The global downturn will pressurise the Indian economy more next year and the government has to speed up reforms and boost investment to sustain high growth rates, a report said on Friday.
The report jointly prepared by World Economic Forum and Confederation of Indian Industry also said India could see a sharp outflow of capital, and a fall in share and asset prices due to the global financial crisis.
The report was released ahead of the annual India Economic Summit starting 16 November in New Delhi, where top government officials are expected to interact with heads of global firms.
“India’s dependence on capital flows to finance its current account deficit is a macroeconomic risk and the global crisis could generate a sharp increase in capital outflows and a reduction in the availability of finance,” it said.
“Clearly, the global economic picture will be harsher next year and there will be greater pressures on Indian economy.”
The global credit crisis has rattled Indian markets as foreign investors sold shares worth more than $12.5 billion so far this year while the rupee fell by more than 20%.
“It (global crisis) could also weaken the balance sheets of the financial institutions, cause a further fall in share and asset prices, and challenge the macroeconomic situation due to shrinking global growth,” WEF said.
Indian policymakers expect a moderation in economic growth to less than 8% in the year to March 2009, compared with 9% recorded in 2007/08 fiscal year.
Earlier this month, Prime Minister Manmohan Singh cautioned that the global financial crisis could be more severe and prolonged, and the government would take all necessary steps - monetary and fiscal - to protect growth.