India has the ability to ride out even the worst sort of financial shock delivered by the Euro zone crisis, assured planning commission deputy chairman Montek Singh Ahluwalia here on Monday. In the worst case scenario where European investors might recall their roughly $140-billion investment, he said India would still have half its foreign exchange reserves intact.
Ahluwalia argued that the forecast of an economic collapse, following a Euro zone blowout, “assumes that no one would want to lend to us in such a situation”.
But, he argued, bankers who looked at the global system would consider India’s lowered 6.5% growth rate to be impressive in comparison to the rest of the world.
Ahluwalia, however, admitted: “We’re slowing down and this is not just because of the world situation.”
He also admitted that New Delhi now had less “firepower’” to handle a financial crisis and it could take another two years to get a reasonable growth rate again.