With the era of easy money over, India now finds itself struggling to regain a GDP growth momentum of 8 per cent-plus. Structural problems such as a high fiscal deficit to persistent inflation have forced monetary tightening that has reduced investment and slowed growth. Political scandals and shortages of factors such as coal, natural gas and land have further hurt the investment environment. The focus now more than ever before is on government policy and the ability of the ruling coalition to implement long-pending reforms that are necessary for India to restore GDP growth to more than 8 per cent.
Our top-down research approach revolves primarily around politics and macroeconomics and aims to provide investors insight into the political economy of growth in this large and complex society. As the government tackles the challenge to increase equality in a society in which the “have-nots” in fact possess both political and extra-constitutional tools (e.g. Maoism) to oppose policies that hurt them, it must remain mindful of the broader risks to economic stability from overspending and creating inflationary expectations in a country where demand far outpaces supply in almost every aspect – from physical infrastructure to human capital.
Besides powerful growth drivers such as demography, consumption and growing rural prosperity – which our coverage has and will continue to address – we also focus directly on the risk that faltering political will or price distortions in energy and electricity will derail progress in important sectors. Our analysis sheds light on previously lagging sectors like agriculture and infrastructure in which there are important pockets of dynamism and whose acceleration is necessary for the entire economy to progress.