The writer is a former governor of the Reserve Bank of India
India surprised forecasters last year. While much of the global economy slowed under the weight of high interest rates and geopolitical uncertainty, the world’s most populous country grew upwards of 7 per cent. Inflation has fallen sharply, and the external deficit remains modest. For investors and policymakers accustomed to India’s boom-and-bust cycles, this combination of growth with stability has revived an old but consequential question: has the Indian economy finally shifted on to a structurally higher growth trajectory?
There is a plausible case that something has changed. India has long oscillated between two uncomfortable states: rapid expansion accompanied by inflation and external imbalances, or macroeconomic stability achieved at the cost of slower growth. Recent performance appears to sit between these extremes.