PM says US financial crisis may hit India

Marseilles: Prime Minister Manmohan Singh has admitted that India cannot remain untouched by the financial turmoil in the US.

The Prime Minister said the nation's capacity to finance development will be affected and exports compromised if major economies go into recession.

In an interview to leading French daily Le Figaro, Manmohan, who is on a two-day visit to France, said the crisis affecting the developed countries at the moment, can spread to rest of the world and wanted India and China to be part of solution finding exercise.

"We live in an interdependent world and the fate of all countries is related to the international financial system. Our value markets are opened to the world and, if they are affected, this will affect our capacity to finance our development," he said.

"If the financial crisis causes a recession in the main economies, this will compromise our exports."

"The proposal of President Nicolas Sarkozy (for a summit to examine consequences of financial crisis) is fundamental," he said adding India was a potentially significant player but not a decisive actor.

"The main responsibility is that of developed countries, but India and China must take part in the solution," he said.

Asked if New Delhi preferred bilateral agreements like the free exchange agreement with the European Union, rather than multilateral negotiations within the framework of World Trade Organisation (WTO), the Prime Minister said the agreement with EU was not substitute for WTO negotiations and it was complimentary.

"With other countries we are working towards a success of the Doha Agreements. The free exchange agreement with the EU is not a substitute for Doha. It is complementary. I would call this 'Doha plus'," he added.

Prime Minister said bilateral trade with France had increased but was below its potential.

"During the visit to India of President Sarkozy, in January 2008, we have decided to double the amount of exchanges by 2012," he said.

In order to maintain a nine per cent yearly growth, India has to undertake major investments to improve its infrastructure which would provide French companies an opportunity to participate.