India’s coalition government just celebrated the third anniversary of its tenure with a self-congratulatory banquet that could not have been more poorly timed: India’s currency, the rupee, is falling; investment is down; inflation is rising; and deficits are eating away at government coffers.
While short-term growth has slowed but not ground to a halt, India’s problems have dampened hopes that it, along with China and other non-Western economies, might help revive the global economy, as happened after the 2008 financial crisis. Instead, India is now facing a political reckoning, as the country’s elected leaders must address difficult, politically unpopular decisions ”” or risk even deeper problems.
“When India was being run comparatively well in 2008, they seemed to cope with these external shocks, at least from a financial perspective,” said Glenn Levine, a senior economist at Moody’s Analytics in Sydney, Australia. “I think people are starting to question the long-term Indian story. That is the difference now.”