India’s economy still waiting to reach a high growth phase

India’s economy still waiting to reach a high growth phase

India’s macroeconomic stability has been impressive compared to many of its peers, with pandemic spending kept in check and the fiscal deficit decreasing steadily. The rupee has remained stable, and core inflation has eased to 3.3 per cent year-on-year. These positive indicators are a result of tough choices made by the government in New Delhi, such as keeping fuel taxes high to boost government revenue and institutionalizing an inflation target for the central bank.

While some investors and analysts are praising India as one of the best structural growth opportunities globally, it is important to look past the hype and understand the real reasons behind these positive economic indicators. The ongoing shift towards the financialization of savings in India is one such reason, with households investing more in formal finance and financial assets like bank deposits and stocks.

The Indian equity markets have seen a surge, driven by this shift in household preferences and the overall transparency and competence of the market. The securities regulator is efficient and independent, minority shareholders’ rights are legally protected, and large companies in various sectors have trustworthy balance sheets and professional management. Foreign and domestic investors alike are drawn to Indian stocks due to these factors, making equity markets a safe haven in the Indian economy.

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