How serious a threat can high fiscal deficits have on Indias growth rate?
Fiscal deficit is probably the biggest downside risk that we see to the Indian economy. At what point of fiscal deficit will it affect GDP growth? It is difficult to quantify but we are quite alarmed by the fact that we expect the fiscal deficit to be a very high percentage of India’s GDP. The basic issue to be answered here will be how you fund this deficit. India is obviously no stranger to fiscal crisis. So nobody wants to see a repeat of what happened in the 90s. But it is a risk. Do you see a meltdown of Indian currency if it falls below 55 to the US dollar? I wouldn’t say meltdown, no. Obviously, we do expect further depreciation but we are not forecasting a meltdown. What are the chances of BJP led NDA coming to power? It is said that the only thing certain about Indian politics is nothing is certain. This election (to the 15th Lok Sabha) is absolutely wide open. Anything can happen and the mood can change even a week before the election. Our core forecast is that Congress has a
