A lower share of output for wages, persistent inflation and a whittling down of covid-time excess financial savings are the risks.
A lot of the recent discussion on the Indian economy has pivoted from the domestic economic recovery towards concerns about the external balance. As an energy importer, India has been hit by a negative terms-of-trade shock over the past year. India is likely to end this year with a current account deficit of $120 billion, which is mirrored in the fact that domestic savings are lagging domestic investment by around 3.3% of gross domestic product (GDP). The widening trade imbalance also means that local demand for consumer goods, machinery, intermediate goods, energy and services is spilling over into the international market, especially as the Indian economy expands at a faster rate than most of its peers.