Growth in India slowed in 2008 amid lessbuoyant domestic demand with households affected by rising inflation and companies by the credit crunch. On the supply side, performance sagged somewhat in industry, notably the automotive sector and services, according to a risk assessment by credit insurer Coface. The fall of property prices by as much as 30% in some cities has weakened the construction sector. In this context, the government has adopted more expansionary monetary policy. With a large fiscal deficit in 2008, however, the government was unable to implement an adequate fiscal stimulus. Consumption will suffer from a worsening job picture and the negative wealth effect associated with the fall of stock-market and property prices. Tightening credit conditions will moreover affect investment. Foreign demand from industrialised countries and emerging Asia is expected to slump. Corporate payment behaviour, which had improved in recent years according to Coface records, could consequently deteriorate.
