CLSA sees India GDP growth at just 4.6%

BROKING house CLSA Asia-Pacific Markets on Wednesday termed India as one of the riskiest markets to be invested in at the moment. The outfit has forecast a GDP growth of 4.6% in 2009-10, and expects the domestic economy to stabilise only by early 2010. Further, it has projected public sector deficit to rise to 14% of GDP in 2009-10, and the rupee to fall to 57 to the dollar by the end of this year.
    The broking house, however, has said an Argentina-styled debt crisis was unlikely.
    "The bulk of Indian government debt is domestically held and Indian banks are eager buyers of government securities. However, not only is the government's $500-billion infrastructure programme on the back burner, but the spread between private and public sector borrowing costs has widened, bad news for private investment spending," the note said.
    CLSA opines that capital outflows — both portfolio and FDI — could continue for some time. "A rapidly widening budget deficit, coupled with slowing growth, falling investment returns, a substantial current account deficit and growing global risk aversion (which is underpinning the flight to safety into the $) suggest that these trends will continue," it said.