The bad news for the economy just keeps on pouring. Today, a CLSA
report predicted that India's GDP growth could plummet to 4.6% in the
next fiscal while fiscal deficit will shoot up to unacceptable levels.
Though some in the government agree with this view, as a whole the
government is still trying to put on a brave front hoping that somehow
the Indian economy will revive in the second quarter of the next
fiscal. CNBC-TV18's Abhijit Neogy reports.

Just when the January IIP figures held out hope that the worst could
be over, there seems to be more bad news for the economy. Leading
foreign brokerage firm CLSA says India's growth may plummet to an
abysmal low of 4.6% in the next fiscal. Some key policymakers agree.

Abhijit Sen, Member, Planning Commission said, "Given the current
conditions where it seems the stimulus measures are still to kick in a
minimum growth of 5% is possible with the optimistic view being 6.5%
to 7%."

CLSA's report paints a bleak picture. Criticising the government's
fiscal profligacy just ahead of the elections, it predicts a total
deficit of 11% this year.

It also says this fiscal slippage will pull the rupee to a lifetime
low of 57 to a dollar, widen the trade deficit, and lead to flight of
capital.

But the real problem, it says, is that investments in manufacturing
have almost stopped. Companies have cut back on capex plans, profits
are under pressure, and returns on investment are disappointing. This
pressure is already reflecting in the revenue collections.

Even the revised direct tax target of Rs 3,45,000 crore may not be
met. The report also warns that an early recovery in this sector may
not happen. It adds that even a 150 basis point rate cut by the RBI
may not be much help. But policymakers are still banking on fiscal
stimulus measures.

"I think we again need a fiscal stimulus of at least 1.5 to 2% of
planned expenditure next fiscal but that call has now to be taken by
the government," Sen said.

The government is convinced that domestic demand, particularly in
rural areas, is intact. A rebound will start from the second quarter
of FY10. Senior Finance Ministry officials tell CNBC-TV18 that with
commodity prices falling, the government will save 1.8% of GDP in the
form of off-budget liabilities. This will offer a revenue cushion to
stimulate the economy, and achieve growth anywhere between 5-7%.

Source: Moneycontrol

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