'India can ride out slowdown better than China'

india

New Delhi: The Indian economy is in a better position to ride out the current slowdown, compared to China, said the head of an Indo-German trade group.

Even as Bernhard Steinruecke, Director General, Indo-German Chamber of Commerce gave this optimistic thumbs-up to the Indian economy, he admitted that exports from India to Germany may see a fall, with the retail sector in the European giant witnessing a drop in demand.

'Mumbai terror strikes meant to hit Indian economy'

"In China, where growth has been so phenomenal, the focus has been on exports. So this could be a period of substantial consolidation (for them)," Mumbai-based Steinruecke told IANS, when a group of high-level business delegation from Germany arrived in India recently.

But India, where exports constitute only a small percentage of the GDP, will weather it much better. "There will be a certain kind of slowdown. But it may be in fact a blessing in disguise," he said.

Steinruecke felt that the feverish pace of economic growth had overshot the infrastructure, leading to skyrocketing salaries and prices in certain sectors such as real estate. "It may bring down the unnecessarily high prices."

Slowing economy, attacks push case for India rate cut

According to him, it was because of this that German companies, suffering from the recession back home, should take this as an opportunity to set up shop here. "You get more value for your money; you are able to get land, people, power at more affordable rates. And remember after the slow period, there will be faster growth," he said.

Germany is India's most important trade partner in the European Union, which is among the country's top five export destinations. Bilateral trade volume had been over $15 billion in 2007.

"In the first quarter of this year, there has been a 20 per cent growth in exports (goods from Germany to India) and a 14 per cent rise in imports to Germany (goods from India to Germany," he said.

Steinruecke said the global crisis had not yet affected trade figures as most of the capital investment had been already committed.

'GDP growth seen slowing to 7.3% in Sep quarter'

But he expected the growth rate for Indian imports to Germany to slow to 10 per cent in the second half. "The retail sector is struggling," he said.

Germany has this month officially gone into recession after two quarters of successive contraction in Europe's largest economy.

India is also feeling the effect of the slowdown with the government revising the GDP growth for the current year to 7-7.5 per cent - an almost 2 per cent drop from 9 per cent.

More India business stories | Get the latest Sensex update

There also has been a sharp drop in exports, with October showing a drop of 12 per cent, compared to the same period last year.

The government has warned that the export target of $200 billion for 2008-09 may not be met. Last year, India exceeded its export target of $160 billion.

SEARCH