Singh Assures Parliament that India will Tide over Temporary Slowdown

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Oct. 23 – Like most nations, India is not an insular economy, it will be affected by the global economic meltdown. Reaffirming his stance, that India's strong fundamentals will prevent it from going under, Prime Minister Manmohan Singh sought to convince foreign investors and the Indian people that although India will face a temporary slowdown, the economy will return to faster growth when the situation stabilises. Singh's statement came to parliment just after the Reserve bank of India cut its key short-term lending rate by one percent to eight percent. The prime minister also promised that inflation would come down in the next two months.

"There is no place for fear," said Singh, credited with starting the process of opening up India's economy to the world in the 1990s during an earlier stint as finance minister.

"This is the time for unity of purpose and resolution of action," he told the AFP.

He added that Indian banks, both in the public and private sector, are financially sound, well capitalised and well regulated.

"There should be no fear of a failure of any bank," he told PTI adding, "I wish to assure depositors in our banks that their deposits are entirely safe".

India, like other developing countries, was experiencing the "ripple effect" of the worst financial crisis in nearly 80 years and India "must be prepared for a temporary slowdown," Singh told parliament.

Singh added that some estimates projected GDP growth to slow down to 7.5 percent this year. "Our effort will be to minimise the negative effect of the financial crisis… to return to the growth trajectory of 9 per cent which we have enjoyed since the past three years," he said.

India has taken a number of steps in the last few months to reduce the impact of the global crisis on its economy. The country has cut the Cash Reserve Ratio by a total of 250 basis points, increased liquidity in the markets, encouraged expenditure and tightened.