With the monsoon so far having been below normal, many economists have revised their growth projections for FY10. Abheek Barua, chief economist, HDFC Bank, discusses the reasons for the downward revision, the threat posed by inflation, and the potential risk to the India growth story from developments in the West and in China. Excerpts from an interview with Sanjay Kr Singh.

What is your estimate of GDP growth for FY10, and what premises have you made while arriving at this number?

Our estimate of GDP growth for FY10 is 5.8 per cent. We are assuming that the impact of the poor monsoon would be largely on agricultural growth and there would be very little spillover to industry and service sector growth. Growth in both these areas has shown a bit of traction in the past few months. In bringing down our estimates from 6.5 to 5.8 per cent, we have left industry and service sector growth projections unchanged but reduced agricultural growth projection from 3 per cent to (-) 3 per cent.

Is the worst of the global financial crisis behind us?

Consolidation and stability seem to be coming back to the markets, though volatility remains. But the consensus seems to be that even if there is a downward correction, we are unlikely to see the levels of early 2009.

What factors helped the Indian economy emerge relatively unscathed from the global financial crisis?

The fact that we are a domestic demand driven economy played a big role in helping the economy retain its momentum. Besides, the government did a couple of things, perhaps by default, which acted as powerful counter-cyclical measures. One was the pay hike of government employees in October 2008. This de facto worked as an income-stabilisation measure. Then we also had the loan waivers for farmers.

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