Shanta Deverajan argues that the US sub-prime crisis would have minimal impact on the South Asian economy because of "little exposure to US mortgage securities, availability of liquidity in the domestic markets, and the possibility that lower capital inflows could help countries such as India with macroeconomic management.". He argues that the "impact will be mild because of the structure of the region’s trade and financial flows, and partly because of compensating effects". More from his blog.
Not all happy news though:
"The Indian IT industry, which derives about 65% of its revenues from the U.S. market, will also be adversely affected if the subprime crisis leads to a recession in the United States."
And given the scale of sub-prime crisis, rising oil prices, pessimism in the stock market, and receding consumer spending, a recession is more than likely in the US market. More here, here, and here.
