Tushar Poddar of Goldman Sachs (India) Securities said that they are not revising GDP growth expectations for India.

Poddar added that they do not expect a credit crunch in India.

Excerpts from CNBC-TV18’s exclusive interview with Tushar Poddar:

A: We have tried to look at three major channels through which any sort of slowdown, in the US, would impact the Indian economy. The three main channels we have identified are the trade channel, the financial market channel and the credit channel.

Now, in terms of the trade channel, if the US slows down, exports from India will go down. We calculated that for every percentage point slowdown in the US growth, imports from the US decline by 4% and that leads to a decline in India’s GDP of about 0.01%. So, it is really marginal from that aspect.

One also has to take into account that there are mitigating factors at work as well. If there is a slowdown in the US, commodity prices will fall, which tends to benefit India. There are substitution effects as well. If growth slows down in the US, Indian exporters may seek other markets. So that is basically the trade channel.

Coming to the other two channels - the financial market channel is through the stock market. Any turmoil in Dow Jones or the S&P impacts us through FII flows and liquidity. We have looked at correlations between the US stock market and the Indian stock market, over the last four to five years.

We have come up with the impact on the Indian stock market and thereby on the real economy. That turns out to be the major channel through which the economy is impacted. But let me point out that this channel is still limited. So, the total impact we estimated, is that every percentage point slowdown in the US will lead to about a quarter of a percent slowdown in India. That is the crux of our estimates.

A: We have looked at the spillovers from the US and credit markets globally, on India. We are currently not expecting a credit crunch in India. That is our baseline case and that is because liquidity is still fairly loose in India.

A: We are not revising our GDP as of yet. We have not even revised our US GDP downwards. We are still expecting about 2% growth in the US. So, we have not revised our GDP numbers, as it is still too early.

The fundamentals of the Indian economy are still very strong. There is structural growth underpinned by higher productivity and higher investment. We think that is likely to continue for the rest of this fiscal year.

A: We have estimated that when there is an outflow of capital from India, as we are seeing currently, portfolio flows flowing out the stock market tends to decline. But the stock market has only a limited impact on the real economy.

The wealth effect, where consumers feel that their incomes are reduced, is not as much in India as it is in the US, where shareholdership is more widespread. The major impact is through investment decisions, IPOs and the like. That is what we have looked at.

We estimate that for every percent fall in the US growth rates and say a 10% decline in the S&P, India’s growth would be affected by about 0.17% of GDP.

A: We do not think that is going to have a major impact for 2007-08, because investment decisions have already been made, consumption remains strong and productivity is still strong.

But it may have an impact on fiscal year 2009. But we will have to look at that depending on the dates in which any election is announced. But we are not very concerned about this issue for this current fiscal year.