Thaindian News

New Delhi, Feb 21 (IANS) Global financial problems, besides a tight monetary policy, are affecting the Indian economy and a slowdown in external demand has led to a decline in exports, Finance Minister Pranab Mukherjee said Tuesday.

Yet, India is better placed than many other countries to face any global turmoil such as the eurozone debt crisis, according to him, and the economy would rebound to a high growth trajectory.

“Continuing global uncertainty is also affecting India. The increased volatility in capital flows is resulting in heightened fluctuations in stock and currency markets with attendant implications for investor confidence,” Mukherjee said at the 91st Annual Session of industry lobby Assocham.

“Moreover, a slowdown in external demand has led to deceleration in the growth of exports in recent months leading to widening of the current account deficit,” he added.

However, he said India was still better placed than many other nations to face any global turmoil.

“India’s resilience results from the fact that the bulk of India’s GDP (gross domesic product) is domestic demand driven. India’s External Commercial Borrowings Policy has been successful in maintaining external debt at sustainable levels,” he said.

Mukherjee said a tight monetary policy had also impacted investment and consumption growth through higher cost of credit leading to slowdown in growth.

However, the slowdown was temporary and the economy would soon revert to high growth trajectory, the finance minister said, adding the government was committed to reforms.

India is projected to grow 6.9 percent in the current fiscal, lower than 8.4 percent registered in 2010-11.

Mukherjee said India had to target double digit growth in the not too distant future, adding that only growing fast is not important but it must be sustained for a long period of time.