View: India has made it to the launchpad. It still needs a spark

economictimes.indiatimes.com:

This year, Indian debt will begin to be included in global bond indexes, starting with JPMorgan Chase & Co.’s products in June, followed by the Bloomberg Emerging Market Local Currency Government Index from January 2025. (Disclaimer: Bloomberg LP, the parent company of Bloomberg News, offers index products for various asset classes through Bloomberg Index Services Ltd.) And, when last quarter’s growth numbers were announced in the past fortnight, analysts were startled to see that the Indian economy had apparently grown at an annualized rate of 8.4%.

There are certainly solid grounds for optimism. India’s macroeconomic stability is impressive compared to many of its peers. Pandemic spending wasn’t excessive. The fiscal deficit has been steadily shrinking as a proportion of gross domestic product. The rupee has been remarkably stable. And “core” inflation, which excludes food and fuel prices, has eased to 3.3% year-on-year, according to data released this week.

Some of this stability is hard-won, born of tough choices that the government in New Delhi has made. Fuel taxes are kept high to feed government revenue, for example, and an inflation target has been institutionalized for the country’s central bank.

Yet, even if some investors and sell-side analysts are touting India as “the best structural growth opportunity in emerging markets, if not the world,” it is worth looking beyond the hype to the real reasons for some of these surging indicators, to judge whether India’s growth is assured in coming years.

Cons