US crisis not to affect India

The slowdown in the US will only modestly affect growth rates in India (and China), says a new report by the World Bank. Fuelled by these two countries, developing economies, as a whole, are expected to post a strong 7 per cent growth in 2008 and 2009, says the study, titled Global Economic Prospects.

World Bank economist Andrew Burns, the lead author, and Hans Timmer, his coauthor, in their 200-page report, argue that it is the resilience in developing economies that is cushioning the current slowdown in the US. They predict that high-income countries will grow at a modest 2.2 per cent against the projected global growth rate of 3.3 per cent in 2008.

The authors say that the credit turmoil in international markets will persist into late 2008, but costs to large financial institutions will remain manageable. Any spillover from problems in the US housing market on consumer demand will remain limited, they add.

—K.R. Balasubramanyam