Economy to recover by 2nd half: Mastercard
The Economic Times, April 30, 2009, Page 7
Our Bureau MUMBAI
INDIA’S economy will revive by the second half this year driven by a series of rate cuts by the Reserve Bank of India (RBI), a recovery in the Chinese economy, and strong growth in the outsourcing sector in the post-crisis period. “The spate of rate cuts will have a lag effect on the Indian economy and subsequently the country should witness healthy growth in 2010-11. Even China is rebounding faster than expected. These factors will fuel the recovery process of the Indian economy,” said MasterCard Worldwide economic advisor Yuwa Hedrick Wong.
A study by MasterCard shows that the policy rate in India has been higher than in China between 2000 and 2008, proving better quality of investments in India. This is because RBI has been vigilant in controlling inflation and the setting of commercial interest rates in India is more market-driven. Real interest rates in India, as a result, are more consistent with market conditions. However, the impact of the global credit crisis on India has been felt through capital flows, which turned negative as early as February 2008 despite the country’s low dependency on exports. Even remittances by Indian workers overseas, especially in Gulf Council Countries (GCC), shrank, affecting the country indirectly, the study stated.
It also indicated that prices of services such as management consulting, legal, computer consulting, healthcare and education were rising in the US despite the recession there. This implies severe supply constraints in such services. At the same time, India’s IT outsourcing sector is best positioned to supply, the study noted. “In spite of the increasingly shrill political rhetoric of protectionism, service outsourcing will become more of a necessity than a nice-to-have option for many American businesses once they have survived the global crisis.”
The Economic Times, April 30, 2009, Page 7
Our Bureau MUMBAI
INDIA’S economy will revive by the second half this year driven by a series of rate cuts by the Reserve Bank of India (RBI), a recovery in the Chinese economy, and strong growth in the outsourcing sector in the post-crisis period. “The spate of rate cuts will have a lag effect on the Indian economy and subsequently the country should witness healthy growth in 2010-11. Even China is rebounding faster than expected. These factors will fuel the recovery process of the Indian economy,” said MasterCard Worldwide economic advisor Yuwa Hedrick Wong.
A study by MasterCard shows that the policy rate in India has been higher than in China between 2000 and 2008, proving better quality of investments in India. This is because RBI has been vigilant in controlling inflation and the setting of commercial interest rates in India is more market-driven. Real interest rates in India, as a result, are more consistent with market conditions. However, the impact of the global credit crisis on India has been felt through capital flows, which turned negative as early as February 2008 despite the country’s low dependency on exports. Even remittances by Indian workers overseas, especially in Gulf Council Countries (GCC), shrank, affecting the country indirectly, the study stated.
It also indicated that prices of services such as management consulting, legal, computer consulting, healthcare and education were rising in the US despite the recession there. This implies severe supply constraints in such services. At the same time, India’s IT outsourcing sector is best positioned to supply, the study noted. “In spite of the increasingly shrill political rhetoric of protectionism, service outsourcing will become more of a necessity than a nice-to-have option for many American businesses once they have survived the global crisis.”
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