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.

* Indian Reserve Bank seeks to regain its own voice, Shumita Sharma Deveshwar, 20 Apr 2017
The Governor’s focus on inflation and his criticism of the farm loan waiver are signs of the central bank trying to reassert autonomy
Macro policy
* India: Hindu hardliners on the ascendant, Shumita Sharma Deveshwar, 24 Mar 2017
Modi incorporates Hindu nationalism into his policy mix of populism and development
* India: The political consequences of Modi’s state election victory, Amitabh Dubey, 17 Mar 2017
Modi’s re-election prospects in 2019 are strong
India: On the road in Uttar Pradesh: Modi’s BJP set to win key election India: On the road in Uttar Pradesh: Modi’s BJP set to win key election, Shumita Sharma Deveshwar, 8 Mar 2017
Modi’s nationalist, pro-poor rhetoric appears to have worked in a high-stakes election
* India: On the road in Mumbai and New Delhi: Investor optimism is high, despite the looming risk of economic disruption, Shumita Sharma Deveshwar, Jon Harrison, 16 Feb 2017
The effects of demonetization and the expected GST rollout will filter through the economy in the longer term but will have a negative impact over the next 12 months, raising worries about the strength of the recovery