Populist shift a risk for long-run outlook

The citizen amendment bill – which aims to fast-track citizenship for non-Muslims from neighbouring Muslim-majority countries – has dominated the news over the past couple of weeks. This isn’t primarily an economic or financial issue, but there are implications. The protests that have broken out in Delhi in opposition to the bill will not have a significant impact on growth in the near term. Strikes are commonplace in India, and Delhi accounts for less than 4% of GDP. The bigger concern is that this continues a trend of populist policy making that has emerged over recent months, including the decision to revoke special autonomous status for Kashmir. A government focused on populist measures shouldn’t pose a threat to the cyclical recovery in growth that we are forecasting. But there is a risk that attention to economic policy slips and foreign investor sentiments sours. Either development would harm long-run prospects.