Late-2000s Recession in Asia - South Asia - India

India

India's economy benefited from recent high economic growth which declined greatly due to the global economic crisis. Economic growth in India during FY2008-09 stood at 6.7%. The global crisis had less impact of India because exports account for only 15% of India's GDP, less than half the levels of major Asian economic powers such as China and Japan. However, unlike other major Asian economies, India's government finances were in poor shape and as a consequence, it was not able to enact large-scale economic stimulus packages. Despite this, from June 2008 to June 2009, industrial production in India grew by 7.1%.

Though he ended up being wrong, the former Indian Finance Minister P. Chidambaram once boasted that he expected India's economy to "bounce back" to 9% during FY2009. India's Prime Minister Manmohan Singh said that the government will take measures to ensure that the economic growth bounces back to 9%. The Asian Development Bank predicted India to recover from weakening momentum in 4-6 quarters. At the G20 Summit, India called for coordinated global fiscal stimulus to mitigate the severity of the global credit crunch. India said that it would inject US$4.5 billion into the financial system to help exporters.

Some analysts pointed that India's growing trade with other Asian countries, especially China, will help reduce the negative impact of the crisis. Analysts also said that India's high domestic demand and large infrastructure projects will act as a buffer reducing the impact of the global downturn on its economy. Economists argued that India's financial system is relatively insulated and its banks do not have significant exposure to subprime mortgage. In an editorial, the New York Times praised the strong regulations placed on the Indian banking system by the Reserve Bank of India.

In May 2009, India reported an economic growth rate of 5.8%, beating most forecasts. In second quarter of 2009 the Indian economy grew by 7.9% and gave indications that the Indian economy would scale a growth rate of 7% or above in 2009 and 8-9% in 2010. In the 3rd Quarter of 2010, the economy had bounced back with a growth rate of 8.8%.