With only two days left for America to announce its third quarter growth, economic growth is widely expected to contract.
The big question, however, that economists want an answer to, is not whether there's a recession, but how long will the slowdown last?
Jehangir Aziz, Chief Economist of JPMorgan India, said, “If you look at the impact of the financial crisis on the advanced economies, while many of them have already gone into technical recession, most are likely to go into recession. There is still a question mark on the US economy-how long will the slowdown there last?”
The bigger question, however, is how will that hit growth in India?
Tushar Poddar, Chief Economist-India at Goldman Sachs, said, “We'll be lucky if the downturn is only for one year and if things trough out in the mid of 2009 and start picking up again. It'll be a very palatable option at this stage and we are expecting that the global recession will bottom out towards the end of 2009. All the measures that the governments across the world have taken will start having an impact.”
No matter when the growth bounces back, the concern has engulfed India in a big way. While policy has the answers for the long term, in the short run, the sentiment is evidently dented.
However, it is quite clear that although the financial markets saw credit tightening, no one had expected the economies to decelerate and that too quickly. But now, all countries, developed and developing are waking up to the realities of a boom going bust.