US crisis may have second-order impact on Indian economy: FM

DAVOS: Anticipating an indirect impact of the US financial crisis on the Indian economy, Finance Minister P Chidambaram today said the country needs to respond appropriately to the contagion in the global markets.

"Long-term effects of the crisis spreading from one market to the other (will) have to be carefully measured and responded appropriately," Chidambaram told reporters here at the World Economic Forum meeting.

Referring to the impact of the US mortgage crisis on Indian economy, he said: "We did not suffer any first order effect. But we anticipate that there will be some second order impact."

The crisis in the Indian stock market, which saw a sharp plunge earlier this week on global concerns, would "pass over in a few days," Chidambaram said.

"At the moment, since there is such a deep uncertainty, investors are hit by a sense of apprehension and that is why they are selling," he said.

The stock market's benchmark index Sensex plunged by close to 2,300 points during January 21-22. After a recovery of 864 points yesterday, it again sunk today.

Investors are estimated to have lost over Rs 16,00,000 crore since January 14, when the downslide began.