Is India heading towards deflation given the rate at which inflation rate is climbing down?
It is possible, but we are not expecting it as an annual average. Because the inflation rate was so high in the middle of 2008, if we do the year-on-year comparison in the middle of 2009, you might see a slight threat of deflation but we really don’t see that happening in India. Given that 2009 is an election year the government is back to fiscal profligacy. How serious a threat can high fiscal deficits have on India’s 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 do
