What to expect in 2017

In our first Watch of 2017, we outline the prospects for India’s economy over the coming 12 months. The government’s demonetisation measures will lead to some weakness at the beginning of the year, but we expect growth to recover due to a rebound in consumption and a pick-up in investment. However, inflation is also likely to accelerate, which could force the Reserve Bank of India (RBI) to reverse its loosening cycle and begin hiking rates before the end of 2017. Meanwhile, with a number of important state elections due to take place, the Modi government is likely to shelve further politically-difficult reform for the time being.