A fast-growing emerging economy like India can ill-afford such a low inflation rate. If high inflation acts as a threat to growth, ultra-low inflation does the same. It is no surprise that this low inflation is symptomatic of the agrarian crisis, wherein rural wages are stagnating and earnings have collapsed for many farmers. Growth brings income and a collapse in inflation will threaten to erase the incentive to produce.
India the best-performing equity market in Asia last year, outperforming even the U. S. and the MSCI emerging markets index in local currency terms and leapfrogging Germany to become the seventh-largest in the world. The MSCI India Index trades at 17.2 times its estimated 12-month earnings, about 59 percent higher that the MSCI Emerging Markets Index.
India’s fastest-growing economy status may not bring as many benefits for it as China could manage while being in this position.
Liquidity concerns around non-bank lenders after IL&FS defaults, trade war fears, higher crude prices and a weaker rupee led to volatility in equities.