Reading the tea leaves to predict the economic future is never an easy task. The current consensus is that the Indian economy is in the early stages of a mild and gentle slowdown, even as inflation jumps beyond 5%. A bit of a problem here and there, but nothing to justify the steep fall in share prices this year.
But should we start getting ready for a more serious downturn? The Paris-based club of rich countries—the Organization for Economic Development and Cooperation—says in a new report that the composite leading indicators it tracks suggest that India could be headed for an economic downturn. These leading indicators give advance warnings about what could happen after six months. Most other major economies except Russia and Brazil could be headed for more trying times.
Official economists would hotly debate this prognosis—and so would most of their peers in the private sector. But India has seen a five-year run of strong growth. We may not go all the way back to the lows of 2002, but a bit of sobriety is in order.