Strong macro fundamentals
India has managed to circumvent high inflation, high fiscal and current account deficits, and pressure on the currency and interest rates with careful monetary and fiscal policy. India’s current account gap, as a proportion of GDP, has narrowed rapidly over the last four years. Its gross fiscal deficit is close to 3% of GDP, down from c.5% in 2012. Real GDP growth has averaged around 7.5% YoY since 2014, up from about 6% in previous years.
While the Indian reform programme has not been without setbacks, it is clear that the aim is to deliver long-term benefits by boosting the supply side. The glass of long-term macroeconomic reforms therefore appears to be more than half full, and there is potential for several policy initiatives to create synergies, thereby increasing the likelihood of all succeeding collectively.