Los Cabos: India's economic woes have not gone out of hand in the wake of the slip in the GDP growth -- the lowest in nearly 9 years -- but there could be trouble if the Eurozone crisis is not quickly contained and financial stability in Europe restored, a top Indian official said on Monday.
Ahead of the G20 Summit of developed and developing countries being attended by Prime Minister Manmohan Singh among other world leaders, Deputy Chairman in the Planning Commission Montek Singh Ahluwalia said India will be "lucky" this year if it can achieve around seven per cent growth rate this fiscal.
The country's economic growth rate slipped to 5.3 per cent in the fourth quarter of 2011-12, lowest in nearly nine years due to poor performance of the manufacturing and farm sectors.
Ways to fix the Eurozone crisis to prevent a contagion effect that could hurt the economies emerging economies like India and China is on the top of the agenda of the G20 leaders who will be meeting in this Mexican coastal resort over the next two days.
Ahluwalia said the general assessment at the ongoing deliberations is that the global economy is "extremely weak" and it could sow the seeds for a second financial crisis in four years if the Eurozone crisis is not handled effectively.
"We have not reached a situation where there is a sudden outflow of funds. We don't need any support from IMF. We are not looking for anything like that," he said.
"We will be lucky to have six-and-a-half per cent to seven per cent growth which is lower than the long-term target," Ahluwalia, who is the sherpa assisting Prime Minister Singh at the summit, said. The G20 accounts for 80 per cent of the global GDP.
Ahluwalia said most countries have exhausted their "firepower" in tackling the faltering global economy and there is not that much fiscal room now.
"We are fortunate that we are not in a position that we will be looking at any kind of emergency assistance. We are not posing to G20 any specific thing that can be done for India. We are basically saying that most important thing that G20 can do for India is to put in place a credible assurance for global financial security," he said.
Ahluwalia said if there is no credible reassurance for global financial security and if there is contagion effect it could be destabilising for India because of the size of Europe.
At the same time, he said domestic constraints also compounded India's economic growth woes, which are being addressed.
"At the moment it is more market nervousness and uncertainty rather than actual crisis, triggered by lots of weakness of the banking system in euro zone. We don't know how these weaknesses could be handled, but there is no doubt that if they are not handled, then we will have second crisis, that will be more serious in the sense most countries have exhausted firepower, there is no fiscal room available now," Ahluwalia said.
"I would not say at the moment that this is more serious because we don't know whether it will be managed or not," he said.
Referring to the emerging political situation in Greece which triggered the Eurozone crisis, Ahluwalia said the very strong statement by the Centre Right party which is likely to form the government that they want to continue with programme of reforms will calm markets a little bit. But, the real problem is how Eurozone is going to respond to resolve the crisis, he said, amid initial fears that Greece was headed for an exit from the Eurozone.
Ahluwalia said that in India's view most of the solutions to Euro zone problem lay within the 17-nation bloc.