Kundapur Vaman Kamath, a co-chair at the recently concluded World Economic Forum Annual Meeting 2008 and managing director & CEO of ICICI Bank, said India would withstand the shock of global economic turmoil, and that India was decoupled from the world Economy.

Kamath, whose bank is the second largest in the country, also came out strongly in defence of sovereign wealth funds--a raging topic of discussion at the WEF meeting here. Speaking informally to a section of the Indian media on the sidelines of the annual meeting, Kamath said in the Indian situation, the subprime situation doesn't exist, and that the Economy was doing "extremely well".

Said Kamath: "A lot of turbulence in the financial Markets can be absorbed by growth. One has to only look at China of four years ago to vouchsafe that. The growth took care of all the stress. In India, the banking system is clean, and there is growth at 10%, so a healthy operational system exists. Even our policies-limiting access to dollar funding and limiting global money coming to India and buying assets-have insulated us from any challenge on that front."

Making it clear that India was economically insulated, Kamath said any impact of the current crisis on India would be marginal. "60% of our Economy is services, and a large part of manufacturing is domestic-facing. Very little serves exports. Then there is agriculture. The Indian system can bear the shock. Even in insurance, asset management and pensions, there is no coupling with the rest of the world. The highest growth will be in invisibles, remittances. That is growing at 30%-it was $30 billion last year and will be $40 billion this year. We are not a nation dependent on exports," he said.

On sovereign wealth funds, Kamath said $80-90 billion had to be injected into the system globally and almost all of this has come from sovereign funds. "You cannot avoid recognising that they have actually provided the missing brick in the whole financial stability structure."

"Clearly, the whole issue of sovereign wealth funds will be discussed in the next one year, and some broad consensus on how to approach this will arise," Kamath said.

"That there is a lot of good in what they have done is not in doubt. What is now being feared is the unknown. That will be explored as we go along," Kamath said, adding that if the $80 billion had not come, the consequences for the global financial Markets would have been dire. "The role of these funds needs to be acknowledged."

He said post the subprime crisis, the pricing of credit risk has changed. "No one is acknowledging that credit risk has changed. But the pricing of that risk has changed. That pricing has an impact which is serious on the books of banks." Kamath said he reckoned things would settle down over the next three months to one year. "No one is sure what the hit taken is. I guess everybody is cautious."...

Courtesy: www.financialexpress.com, January 28, 2008