NEW DELHI (AFP) — India must brace for a "temporary slowdown" as a result of the global financial crisis but will return to faster growth when the situation stabilises, Premier Manmohan Singh said Monday.
Singh's statement to parliament was his first on the impact of the financial turmoil on India's fast-growing economy and came as the central bank cut its key short-term lending rate by a full percentage point.
The rate cut to eight percent was a bid to calm domestic markets and spur economic growth.
"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 said.
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.
But he said the country faced no risk to its banking sector as in developed nations where some countries like Britain, Germany and Spain have been forced to bail out banks and restore confidence in their financial systems.
India's tightly regulated banks were financially sound and well capitalised, he said.
"There should be no fear of a failure of any bank," Singh said. "I wish to assure depositors in our banks that their deposits are entirely safe."
He said the government aimed to minimise the impact of the slowdown by increasing expenditure, adding the fundamentals of India's economy were strong.
He said the impact of the international crisis on India was still "difficult to estimate at this point since the depth and duration of the global slowdown remain uncertain."
Singh noted the most "pessimistic estimates" projected India's economic growth for the year to March 2009 at "no less than seven percent" after the economy grew by nine percent or more for the three previous years.
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