GURGAON: Drastic cut in interest rates by the US to avert a recession will affect India, but New Delhi will take steps to counter such an impact, Finance Minister P Chidambaram said.Without elaborating on measures that the country may initiate to insulate itself from a possible recession in the US, he told industry captains at the CII summit here that "India is not so dependent upon the US as some countries are."Our exports to the US are significant, but not so significant that we will be gravely affected." Responding to a query on the impact of a US slowdown on India, he said: "It will have some impact, of course.

"However, if the US, as a response to the slowdown, cuts interest rates very drastically that will widen the difference between the US interest rate and Indian interest rate and that has consequences like capital flow and faster appreciation of the rupee." Since October 2006, the Indian currency has risen over 15 per cent against the US dollar, the main invoicing currency for trade.Although India enjoys a trade surplus with the US, which also happens to be its largest trading partner, Chidambaram said New Delhi has "equally large exports to Europe, to eastern countries like China and Japan. Therefore, I don't think that a slight slowdown in US economy will immediately or drastically affect India's growth prospects."

The Prime Minister's Economic Advisory Council projected that economic growth might moderate to 8.9 per cent in 2007-08 fiscal against the July forecast of 9 per cent. "If US goes through recession there will be global consequences and India will also have to bear a part of the consequences. I hope the US government will also take measures to stimulate growth and we will also respond by taking necessary steps," Chidambaram said. According to government data, total commerce in merchandise and commodities between US and India was USD 21.7 billion in 2004, growing at about 20 per cent over the previous year.

India's exports were at USD 15.6 billion, while imports stood at USD 6.1 billion, giving the country a huge trade surplus over the world's biggest economy.