India: Reverting to a new Hindu rate of growth?

India a Divided polity  and a fragmented society. Sub optimal India held back by lack of consensus

1. Politics and society may well hold Indian growth back. The provincial  election results seem to  put the clock back on India's yearning for reforms. An emboldened opposition will  now be more aggressive, which could well imply obstructing reforms. The upper house numbers will just not add up to lend support to crucial legislative  reforms. It will be an era of concessions and compromises. Restrictive practices are bound to be nurtured by re-energized trade unions. The political setback to the Government will fuel disquiet. India's bank unions have disregarded  high levels of NPA and lower productivity in many of the state run banks and are calling for a nation wide strike against reforms. . Disinvestment plans will be rolled back. India will revert to  being inside the production possibility curve. Populist measures will return in a country which has a 3.9 % fiscal deficit. Already low on investor confidence as evidenced by large volume withdrawals by FIIs, the uncertainty will shake up Mumbai stock exchange with local investors naturally seeking to exit. Domestic financial institutions may be prompted to support  rather than natural demand and supply arriving at a new equilibrium. The burden is then passed on to the taxpayer.  

Is India reverting to a sub optimal improvised (doubled?) Hindu rate of growth? (This term was coined by  an Indian Professor, Raj Krisha who spoke of the 1950-80 average of 3.5 % growth) . India seems incapable of a double digit growth.  China is already at least nearly a decade ahead and India just cannot seem to catch up. Less talk and more consensus driven work may well be a good advice for less government and more effective governance.

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2. San Francisco Federal Reserve Bank President John Williams  thinks it makes sense to gradually remove the policy of accommodation that helped get the  economy. One more move on the chessboard towards an interest rate hike. That should put emerging markets under pressure. Fed seems to move one step in the direction of hike.

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