India's economy will continue its rapid growth despite a 15% slowdown in foreign investments since last year, predicts Philip T. Wyatt, research analyst at G.T. Management (Asia) Ltd., Hong Kong.
The cumulative effect of the foreign money that already has flowed to India since it loosened investment controls in 1992 should keep the country buoyant.
India raised $2.9 billion through direct and indirect foreign investments for the year ended Jan. 31, Mr. Wyatt said.
Nonetheless, the country's budget deficit might worsen in the year ahead.
Prime Minister P. V. Narasimha Rao might find it tough to stick to spending plans and subsidy caps as he primes up for elections. Freewheeling government spending, in turn, could hamper efforts to keep double-digit inflation in check and lead to rising interest rates. That would be ill omen for the stock market, Mr. Wyatt noted.
India's budget deficit, around 6% of gross domestic product, was anticipated to drop to 5.5% of GDP in the current financial year, according to reports by the government.