With Indian stocks dropping to a 2-year low on Thursday, analysts say the country - which was relatively sheltered during the last financial crisis in 2008 - is looking especially vulnerable this time around.
The Bombay Stock Exchange Index is down more than 24 percent since the beginning of the year and the rupee has fallen 17 percent against the dollar during the same period, hitting an all-time low earlier this week.
Renowned investor and China bull Jim Rogers told a CEO Power Session at the Asia Business Leaders Awards in Singapore, that he was short on Indian stocks.
Rogers said the country would find it hard to grow, given a debt to GDP ratio of over 90 percent. India's debt picture could get worse. Earlier this week, Montek Singh Ahluwalia, the head of India's Planning Commission told CNBC-TV18, the budget deficit for the current financial year could be as high as 5.5 percent of GDP.
He also said the economy was likely to grow just 7-7.5 percent in the fiscal year ending March 2012 – a far cry from the government’s original target of 9-9.5 per cent.
India is also facing a worsening current account deficit, which widened to $14.1 billion in the April to June quarter from $5.4 billion in the March quarter. Numbers for more recent quarters haven't been released but they could show a deterioration given the debt crisis affecting Europe.
Piyush Gupta, the CEO of Southeast Asia's largest bank believes Asian economies are going to slow down by one to two percentage points over 24 months because of weakening exports.
According to Gupta, even though exports make up around 30 per cent of China’s GDP, compared to just 19 percent for India, China has more ammunition to weather the global economic slowdown than India over the short term.
“China has the capacity to press the accelerator….it can spend half a trillion dollars…(to stimulate the economy), where as it is difficult for India to do that with a fiscal deficit of 10 percent,” said Gupta, referring to the fiscal deficit of both the central government and all the states.
He however, added that 10 years down the road, India could be in a better position than China because capital allocation and financial institutions work better in the country.
In addition, he points out that domestic consumption makes up 67 percent of the economy, while in China it makes up 34 percent, giving India a greater cushion from a troubled global economy.
Watch CNBC's Asia Business Leaders Awards on TV and via live streaming on CNBC.com on Thursday, November 24th at 8 p.m. Singapore/HK time.