India

Trusted Sources has unique expertise in India to provide comprehensive political and economic analysis as the first single-party majority government in 30 years seeks to implement a broad-ranging reform programme to help sustainably revive the domestic economy. Our analytical team, which is based in New Delhi, has a close insight into policy drivers. The team travels regularly throughout the country, most recently to Uttar Pradesh and Punjab ahead of crucial state elections. It combines political, economic, social and external factors to provide independent investment research that goes far beyond short-term data to offer clients not only the big picture but also actionable views. Our weekly thematic and drill-down coverage looks into key sectors such as infrastructure and consumption and constantly monitors the impact of commodities markets on import-dependent India.

Prime Minister Narendra Modi’s government has an historic opportunity to carry out structural economic reform. Favourable external conditions – notably, softer commodity prices, which have led to a near automatic macroeconomic rebalancing – are aiding a cyclical recovery, as is the effective Reserve Bank Governor Raghuram Rajan, who is bringing India’s monetary policy up to the global state of the art by implementing inflation targeting and other financial reforms.

But even at the best of times, governing India is a difficult balancing act, particularly when there is no crisis to break down the resistance of various interest groups. India may well be the world’s most complex society – a federation of nation-states, many of which are organized along linguistic and ethnic lines and riven by competing ideologies and overlapping jurisdictions. Thus, reform requires Modi to mobilize the electorate’s desire for change while navigating myriad constraints imposed by the upper house, an activist judiciary, state and local politicians, the bureaucracy and special-interest groups.

For these reasons, we expect Modi’s reform strategy to be incremental as he prioritizes what is possible rather than what is theoretically best practice in order to protect the ruling Bharatiya Janata Party’s political interests. The risk is that this approach may allow time for internal opposition to reform to crystallize, especially if external shocks drive up inflation and energy prices or undermine the recovery. Supply-side bottlenecks persist in almost every aspect of the economy – from physical infrastructure to human capital, meaning that the threat of inflation resurgence persists. From a political perspective, the risk is that Modi overcentralizes political authority, perpetuating the policy backlog that he was elected to overcome.

* India: On the road - Modi likely to win tough poll, Amitabh Dubey, Shumita Sharma Deveshwar, 11 Dec 2017
Modi’s party looks set to retain his home state of Gujarat, but expect less reform and more populism as it is on the back foot politically
Politics/governance
* India In charts: No easy fix for the economy as polls approach, Shumita Sharma Deveshwar, 30 Nov 2017
Macro policy
* India: New Congress takes the fight to the BJP, Amitabh Dubey, Shumita Sharma Deveshwar, 27 Nov 2017
As Rahul Gandhi takes over the leadership of the Congress party, a tepid economy gives him political ammunition against the BJP
Politics/governance
* India: State banks still stand on shaky ground, Shumita Sharma Deveshwar, 9 Nov 2017
Bank recapitalization is a crucial first, albeit incomplete step towards reviving the flawed banking sector
Macro policy
* India: On the road in Uttar Pradesh: GST woes hurt Modi’s popularity in busy poll season, Shumita Sharma Deveshwar, Amitabh Dubey, 26 Oct 2017
Sentiment on Modi turns negative in the state where his party won a landslide election six months ago as voters face economic difficulties.
Politics/governance