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India is growing. But then... 
(Mon, 15 Nov Pre-Open) 
 
India's Finance Minister Pranab Mukherjee seems a happy man. This is given that the Indian economy has moved from the throes of a slowdown to rapid recovery under the stewardship of his government. It is another thing that a key reason for this recovery has been cheap money flowing around the world and coming in droves into India.

So the economy is back on track. Stock markets are booming. Everything seems hunky dory. And the politicians are happy. Mr. Mukherjee is now even optimistic that the Indian economy will soon return to the 9% growth path.

This - undue optimism - with respect to sustained economic growth is what is the fearful part here. People were talking about a decoupled Indian economy till the bubble burst in 2008. Then they thought that the world is tied to one long chain, and India has to catch cold when the US sneezes. Now, when we are back to the recovery track, the noise about 'decoupling' is again getting louder.

The ironical part is that, as we've said above, a large part of the current recovery in emerging markets like India is a result is due to our connection to the western world. Central banks there are printing money like there's no tomorrow. And, in search for higher yields, that money is flowing straight to emerging markets like India, spurring growth here.

The fear is - what happens when this tap of easy money supply runs dry. India is growing, and rowing fast as of now. But then, how much of this growth is real and how much is stimulated? We're not sure what the answer to this is.

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May 23, 2017 12:28 PM

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