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: Stake sales to test Modi’s political will, Shumita Sharma Deveshwar, 10 Aug 2017
The privatization programme’s revival is an encouraging sign that the government is willing to use political capital to pursue tough reforms.
Macro policy
* India: Competition with China enters new phase, Amitabh Dubey, 3 Aug 2017
Even as their border standoff eases, relations between China and India are set to deteriorate
Politics/governance
* India: Smooth GST rollout masks important risks, Shumita Sharma Deveshwar, 27 Jul 2017
The historic tax reform gets off to a good start without any major disruptions to business, but uncertainty over rules and impact of new tax persists
Macro policy
* India: Politics hampers RBI’s battle for credibility, Shumita Sharma Deveshwar, 13 Jul 2017
The Reserve Bank of India’s nascent inflation targeting approach has come under fire amid surprisingly soft inflation figures
Macro policy
* India: Food deflation changes electoral dynamics, Amitabh Dubey, 7 Jul 2017
Falling agricultural prices could damage incumbent governments in approaching state elections
Agriculture/food