India is now one of the riskiest markets to be in, according to CLSA Asia Pacific Markets.

In its weekly economic commentary released on Wednesday, CLSA said tax revenues were crashing, expenditure exploding as the government in a bid to win the elections had given 'full bridle to its populist urges.'

CLSA forecast that the public sector deficit, already 11 per cent of the GDP this fiscal year, would rise to 14 per cent in FY09/10. Ten-year bond yields had spiked and the rupee was weakening again.

Pointing out that it was not forecasting an Argentine style debt crisis, the report said not only was the government's $500 billion infrastructure programme on the back burner, but the spread between private and public sector borrowing costs had widened, which is bad news for private investment spending.

Meanwhile the cyclical growth slowdown is worsening; credit growth is slowing; the manufacturing recession is deepening; job losses are climbing; non-oil imports are slowing and inflation is falling rapidly belying the underlying weakness of domestic spending.

CLSA forecast 4.6 per cent GDP growth in FY09/10 and expected the domestic economy to stabilise only in early 2010. 'We expect the rupee/dollar to see 57 this year and for interest rates to fall by another 150 basis points from here,' CLSA said, adding the deluge of bad news out of India had been pretty continuous.