The Greek debt monster has raised its head once more to wreck havoc in markets across the globe. Indian markets too suffered on account of this. However, India’s strong economic growth coupled with domestically-funded fiscal deficit may provide the country ample cushion to escape unhurt, in case the European fiscal crisis worsens, says a report from Citigroup.

The report elaborates, “Although India, with a fiscal deficit forecast at 8.5% in 2010, may seem vulnerable to any worsening of the European fiscal crisis, its strong growth trajectory should ensure that its debt dynamics remain stable, while its deficit is primarily domestically-funded.”

The European fiscal crisis is happening as a result of heavy borrowings by the governments of countries such as Greece, Portugal and Spain. As the borrowings are international and not restricted to the concerned countries, the crisis is affecting economies all over the world. Experts opine that economies with high deficits are the most susceptible to the crisis.

India’s fiscal deficit is a matter of concern with the forecast for 2010 pegged at 8.5%. However, the country’s deficit is basically domestically-generated and hence may not add fuel to the crisis.

The report classifies economies as ‘overweight’ or ‘neutral’ in terms of the European crisis. Among the 22 economies covered by the report, India is in the ‘neutral’ category along with China, Chile, Mexico and South Africa. The ‘overweight’ economies are Taiwan, South Korea, Russia, Brazil, Turkey and Thailand.

However, Indian economy may not escape unhurt altogether. There is bound to be some impact. The affected will be companies having trade relations with countries in the European zone. One of the major fallouts will be fluctuations in currencies.