In 5 Charts, Here's Why India's Economy Is In Trouble

Earlier today, we highlighted both the positive and negative macro indicators in the Indian economy.

But with economic growth at a 10-year low, it’s worth taking a closer look what has gone wrong.

Below are five charts from Morgan Stanley.

First, inflation has started to tick up again. Food inflation is back at a six-year high, and onion prices have soared over 200% year-to-date.

Projects under implementation also fell. India recently created the Cabinet Committee of Infrastructure (CCI) to avoid project delays which frequently arise over land disputes and because of environmental concerns:

The current account deficit is narrowing, but continues to pose a threat to the rupee and economic growth.
Gold imports, which are part of the reason India has a high current account deficit, declined in July and August. But the weakness in the rupee and oil price movements will play a crucial role in narrowing the current account deficit:

The rupee is still down nearly 13% year-to-date, against the U.S. dollar. The central bank intervened to support the currency:

Short-term interest rates are expected to stay elevated for a few more months and this is likely to strain GDP growth, which climbed just 4.4% in the first quarter:

Of course there have been some improvements in the Indian economy. For instance, industrial production ticked up, corporate revenue growth has improved modestly, and auto sales are picking up.

But Morgan Stanley analysts Chetan Ahya and Upasna Chachra expect “slow growth and higher rates to stay for a while longer.”

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