Even so, India is experiencing the knock-on effects of the global crisis, through the monetary, financial and real channels – all of which are coming on top of the already expected cyclical moderation in growth.
Our financial markets – equity market, money market, forex market and credit market – have all come under pressure mainly because of what we have begun to call “the substitution effect” of: (i) drying up of overseas financing for Indian banks and Indian corporates; (ii) constraints in raising funds in a bearish domestic capital market; and (iii) decline in the internal accruals of the corporates.