With most of the bailout packages designed on the basis of flawed (rather over optimistic) assumption of economic growth, more austerity might kick-in, forced by the austerity hawks, leading to further weakness.
India will not be immune to this worsening situation. Exports would slowdown further. Deficit induced austerity (unlike sovereign debt induced austerity in Europe) in India will impact growth. However, if India sticks to the commitment of unshackling itself from the structural constraints, lower growth in the short term is a small price to pay for long term growth sustainability. However, if we fail to learn from Europe and continue to drive along the profligate pathway, it will be but a matter of time before our fiscal problem morphs in a debt problem. But will our myopic policy makers play ball? Hope is the buzz word here.