No major impact of US crisis on Indian economy: Y V Reddy

Reddy, credited for firmly anchoring the domestic financial system and economy during the pre-crisis boom that helped the country tide over the 2008 disaster earlier than expected, said, "Though there will be some spill-over effect on our economy, it won't be that grave as our growth is primarily driven by domestic consumption."

Ruling out a recession in the short term, he said a slowdown in global economic growth was for sure in the mid-to medium-term.

"While the 2008 crisis was a revelation for everyone, the present crisis arising from the US downgrade by S&P and the lingering debt crisis in the Eurozone economies, is a realisation of the fact that the fundamental problems are still not rectified," Reddy told PTI over phone from Hyderabad.

However, he cautioned that it was too early to assess the development as the situation is too fluid now. Projecting an economic expansion of around 8 percent for the domestic economy, with a downward bias, he said to achieve that growth rate, our policy focus has to be fine-tuned at the earliest.

Whether there will be a flight of capital if the US economy slips into another recession in the wake of the last week's downgrade-from triple A to double A+-- Reddy said, "If there is excess liquidity in the US system, then we have a fair chance of getting more capital inflows. But if a serious slowdown kicks in, there could be volatility in the fund inflows"