World risks slowdown from self-imposed fiscal prudence: Tata

Tata Group chairman Ratan Tata has said that there is a likelihood of a general slowdown in industrial activity in Asia compared to the growth rates achieved over the past few years.

The quarterly growth figures in Asia have been declining during the year and it is expected that both China and India will register lower growth rates in 2011-12. There is,therefore,a likelihood of a general slowdown in industrial activity in Asia compared to the growth rates achieved over the past few years and possibly a noticeable drop in consumer demand for goods and services, Tata said in a message to shareholders in group company Tata Motors’ annual report. China’s automotive slowdown is akin to that of India,Tata added.

Automobile sales in China,one of Tata Motors most promising markets in terms of Jaguar Land Rover (JLR),have declined for the first time in two years.

Cautioning about another slowdown,Tata said,What should be of concern to all is the creation of a situation where the pendulum swings too far in the opposite direction,causing another global slowdown this time,not based on over-valued assets but on self-imposed fiscal prudence. It is hoped that a realistic balance will be achieved in the Asian countries to ensure that these countries continue to be the drivers of growth,innovation and prosperity for millions of their people as also both sources and markets for the rest of the world.

The health of the world economy in 2012 and beyond will depend more heavily on the economic health of Asia, Tata said.

Inflation is indeed a lurking enemy of healthy growth and needs to be controlled. Speculation in natural resources that have a significant impact on the entire value chain of industrial production also needs to be controlled.

While 2010-11 has been a year of high economic growth in Asia,the quarterly growth figures in China and India have been declining,Tata said. Inflation rates have risen and the central banks in both countries have initiated measures to slow down their economies to curb it. The resulting high interest rates,tighter credit regimes and higher fuel costs will dampen consumer demand, he said,adding that the extent of a slowdown in Asia will depend on the severity of anti-inflationary steps adopted.