The financial crisis sweeping eastern Asia is unlikely to have an immediate impact on India, according to the chairman of the country's third-largest bank.
Manohar G. Bhide, chairman of $10 billion-asset Bank of India, noted that his country does not have an export-dependent economy nor are its banks and corporations as highly leveraged as those of South Korea, Thailand, Indonesia, and Malaysia.
"Indian banks and companies still depend mainly on the domestic market," Mr. Bhide observed. "The position they have is strong enough to sustain them."
The Indian banker's comments came amid increasing concerns that India could suffer the kind of financial turmoil that has occurred elsewhere in Asia.
Since reaching a high of 4,548 on Aug. 5, the Bombay stock exchange index has fallen below 3,400, a drop of more than 25%. The value of the Indian rupee has also weakened from a high of 35.6 rupees to the U.S. dollar in the last 12 months to around 40, a decline of about 12% despite a sharp increase in interest rates.
Although both the fall in the stock exchange index and the rupee have been substantial, they were still far less than recent declines in other Asian countries. In South Korea, for example, the won has lost more than 50% of its value during the last six months.
Analysts generally concurred in the Indian banker's views. But they also emphasized that uncertainty about India's economic outlook is increasing.
"India's problems are far less than those of other emerging-market countries," Hong Kong and Shanghai Banking Corp. noted in an internal report released this week. "However, the Asian political and economic crisis signals a worsening of Indian fundamentals."
"So far, the huge domestic market has saved India," said Gary Kleiman, president of Kleiman International Consultants Inc., a Washington financial consulting company. "But very little foreign money is coming in, and the case for boosting your presence in India is not very compelling."
Mr. Bhide warned that India could still face fallout from the crisis in East Asia. "It's not impossible that Southeast Asian countries could start flooding India with exports," he said.