Prajna Capital - An Investment Guide

While FY09 may be a crunch time for India, given the situation of a rising current account deficit and lower capital flows, the pressure could ease a bit from FY10 IT IS difficult to make a call on how FY10 is likely to pan out, but one thing is clear, the days of 9%+ growth are over, believes Citigroup. As per a recent Citigroup Global Market report, India has lost the opportunity to sustain those levels for now, with growth coming in around 7%+ levels in FY09-10. With supply side measures not really being effective in bringing inflation down, Citi expects RBI to continue to raise rates to temper demand-side pressures. Much further monetary tightening however poses downside risks to both Citi’s FY09 and FY10 GDP estimates of 7.7% and 7.9%, respectively. Rising interest rates and input costs are also likely to result in a deceleration in investments to 10.4% and 7.9%, respectively. But what could possibly offset this are the low real interest rates and improvements in productivity. Wh...