Will the sub-prime induced recessionary pressures in US and Europe impact Indian Growth?

[R.V.S. Sridhar]

From many accounts it seems that the big flow of money into India by way of FII, FDI and PE flows was linked to the recent (post 2002) growth phase seen in the US. The phase saw low inflation and low rates (for a good part of the phase). The growth in the US helped increase exports from Asian countries. Trade grew rapidly. Many Asian countries intervened to prop up the Dollar in an effort to support their exports.
The conditions which brought about the high growth phase in India are now in danger of disappearing. We have already witnessed an almost USD 8 billion worth of outflow this year compared to a net inflow last year of about USD 18 billion (full year). So much of money had flown into Real Estate and Infrastructure sector. This money is now drying up; initially this result was brought about by the troubles that brewing in sub-prime mortgages in the US. As banks began to worry about their health, they cut the flow of liquidity into these sectors. PE funds will now capitulate since their returns are already under threat and since over the next 12 months, the Indian Market should become less attractive.
As the US draws into a recession and threatens to take Europe along with it, and as liquidity dries up, the question I have is this - Will growth in India be impacted?

[Donald L. "Skip" Conover]

Yes, it seems so. Today's Wall Street Journal says there will be many layoffs in the next 10 days. Let's see!