Mid-Year Economic Analysis 2014-2015

In July 2013, India was teetering on the edge of macroeconomic crisis with double digit inflation, a high and rising current account deficit (CAD), and a falling rupee as investor sentiment turned sour in the aftermath of the Fed's taper decision to signal the end of its quantitative easing. India was grouped with Brazil, Indonesia, Turkey, and South Africa to constitute the Fragile (Famous) Five amongst the emerging market countries (EMs). Nearly 18 months on, the landscape has vastly changed. Macro-economic stability has returned, reforms are being undertaken, the external environment has moved in India's favour, and above all, a new Government has come into power with a relatively unencumbered political mandate for decisive economic change, a mandate that markets have enthusiastically embraced. The Indian stock market has increased in value by 33 percent since March (in dollar terms), amongst the highest in the EMs, benefitting from surging foreign capital inflows. India now represents one of the sparks in the world economy and the only major country not to suffer a growth downgrade by the IMF. From Fragile Five to Near-Solitary Spark of the global economy is the Indian narrative of the last year.