Current stagflation like mix of low growth and high inflation, which basically restricts any policy flexibility to respond. 

Moderation in income growth and slower job creation, I would say, are the primary factors. 

We have seen this year that pent up demand has faded and we’ve normalised to some trend below the range of what we had seen in the last two years. On top of that, there are certain cyclical factors that are impinging on the trend. In particular, the availability of consumer credit has moderated, which was a regulatory decision to contain macro financial stability risk. Some of these loans were being used to purchase maybe low ticket consumer discretionary items.  

Second, income growth seems to be moderating. In India, we don’t have very good proxies for urban wage data, but we use certain estimates, for instance, the staff and salary expenses of listed non-financial companies. That was growing in double digit, but has now moderated to between 6 and 7 per cent. If you adjust for inflation, the real increase is less. Even on a nominal basis, salary increases have come down.  

Third, the extent of job creation has been much lower in this recovery cycle as well. 

The biggest risk we see right now is actually on the growth front. Lots is going on in terms of the impact of the monetary policy. We do think that our potential growth is 6.5 to 7 per cent and our aspirational growth is close to 8. In the next 6 to 12 months, we will fall short of even the trend growth – that would be the biggest risk in our view. 

On the other hand, commodity price outlook under Trump 2.0 could potentially be positive for India. That is, if indeed the US moves towards increased oil production, then we could see lower oil prices, which from India’s perspective could be a source of disinflation going forward, and even the Reserve Bank of India, which has been very constrained in reversing its monetary policy course; we think the extent of policies is going to be a positive surprise in 2025.