The India growth story may hit a slower patch in 2008, going by different outlooks for the new year which say the country may witness slower GDP growth and even flight of foreign capital to markets like Korea and Indonesia.
In its 2008 Economic Outlook for Asia, Switzerland-based banking giant UBS said that Asian growth will slow next year, reflecting the impact of a slowdown in the US and Europe.
Besides, there could be a strong investment switch away from markets with a strong domestic focus such as China and India towards export-oriented Korea and Indonesia, UBS said.
In a separate report, another banking major, US-based Citigroup said in its 2008 Asian Economic Outlook that infrastructure bottlenecks and talent crunch pose long-term hurdles to India’s economic growth, while worsening global outlook and political scenarios pose short-term risks.
“India has the potential to further lift its growth level from 8 per cent to more than 10 per cent. Infrastructure development and talent crunch would, however, pose long-term hurdles and worsening global outlook and politics could pose short-term risks.”
Earlier last week, Citigroup had said that China and India had become the two most expensive stock markets in Asia-Pacific, following a sharp rally in 2007, mostly driven by their strong economic growth rates. It named Thailand and Hong Kong as markets with best growth potential in the region.
Citigroup had forecast India’s GDP growth for FY07-08 at 9.4 per cent and 9.8 per cent in the next fiscal, against 9.3 per cent in fiscal ended March 2007.
However, Paris-based Organisation for Economic Cooperation and Development (OECD), a lobby group of the world’s industrialised nations, said in its half-yearly global economic outlook that India’s economic growth was set to slow down in the current and next fiscal years.