Can a citizen of Guatemala sponsor visitor visa of an Indian citizen?

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I don't know about Guatemala in particular, but unless you positively know different, the safe thing to do would be to assume they want to see the same things in a visa applications as the immigration-skeptical developed countries we usually have questions about do. They may turn out to be less strict than that, of course, but I'd suggest erring on the side of caution.

Under that assumption: No, having a local sponsor certainly doesn't mean you can skip documenting your own economic situation. They don't just want to know that you'll be able to eat and sleep while you're in their country, but also that it makes sense for you to go there in the first place and then go back to India.

This means you ought to document that you have a job to return to, a stable life situation in general, and that it looks reasonable given your income and savings to spend whatever you'll be spending on the trip. Otherwise a suspicion will arise that you're actually going for work rather than for a short trip.

(If your sponsor is also paying your airfare, expect both your and her situation to be strictly scrutinized).

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