Risks I’m monitoring
Political and policy stability under Prime Minister Narendra Modi, who remains very popular with most voters (and, as of this writing, a shoo-in for reelection in May 2024), will be key to continued structural momentum in India.
Beyond that, my main near-term concerns are that: 1) the country’s core inflation rate is likely to remain elevated (comfortably above the RBI’s 4% target) for most of 2023; and 2) the current-account trade deficit may widen further from its already high levels as global demand likely softens. While the RBI’s monetary policy committee members sounded pretty dovish late last year, I suspect that the persistence of inflation may lead the central bank to eventually tighten policy a bit more than the market was pricing in at last check.