India: A Roaring Tiger or Lumbering Elephant?

Corrections do not negate the unequivocal benefits that accrue from a rising stock market— drop in cost of equity capital and shift in household savings to financial assets

- NANDITA RAJHANSA & SAURABH MUKHERJEA

BOTH SAURABH AND NANDITA studied economics at a postgraduate level. As they were doing so, they came across a body of literature on the Indian economy that either sees India as a broken economy or as a shining exemplar, a country on the ascent. They do not believe that such polarised accounts do justice to the multifaceted nature of change playing out in 21st century India. To be specific, there are three different dimensions of change that they feel are neglected:

Two steps forward, one step back: No free-market democracy moves forward in a linear fashion. Periods of growth are typically followed by periods of hardship. Part of this is due to the economic cycle, wherein periods of expansion typically result in rising inflation, as demand outstrips supply sooner or later. That is then countered by policymakers by hikes in interest rates which then slow down the economy. If these rate hikes continue for an extended period and are accompanied by other shocks, e.g. rising oil prices, then the economy often enters a period of low growth or contraction.