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Economy will recover by 2010-11, says expert

Special Correspondent



T. N. Srinivasan

HYDERABAD: A coalition which has Indian poor at heart, understanding on what needs to be done and capacity to get things done through Parliament can put the economy back on the rails.

However, if a coalition of desperate groups, which have parochial and myopic intentions, comes to power, it won’t help the nation, according to T. N. Srinivasan, Professor at Yale and Stanford Universities in the U.S. He wanted the country’s economy to be further opened up.

Prof. Srinivasan said here on Saturday that he foresaw Indian economy recovering by 2010-11, if the elections gave favourable results and if the monsoon was good.

“We did not have a meaningful price index to measure inflation. The wholesale price index (WPI) was neither producer-oriented nor consumer-oriented. This absurd index cannot measure inflation,” he said. The WPI never took into account the services sector that accounted for 60 per cent of the gross domestic product (GDP). The consumer price index and WPI had never been in sync with each other.

On the stimulus packages, Prof. Srinivasan said pumping in a lot of money into the domestic market would not help boost the economy, as it could not stimulate domestic demand. Unless supply constraints were addressed, the stimulus would not yield the desired results in the Indian context, he said.

Delivering a lecture on real and financial linkages at the Indian School of Business, Prof. Srinivasan said that Indian economy did not have as much impact of financial crisis as in the rest of the world, thanks to prudential regulatory norms and controls. However, financial integration happened much faster than the real integration with the world markets in India.

The growth rate had been dwindling even before the onset of economic crisis. The financial crisis had an effect on export demand. The U.S. economy might grow by half-a-per cent in the third quarter of 2009 and 1.5 per cent in the last quarter. The European economy too was likely to grow. This would result in Indian economy growing.

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