Till fairly recently, the Narendra Modi government could take consolation from the fact that despite many hiccups, the overall macro economic numbers had improved through much of its term. And, in spite of disruptions caused by demonetisation and GST, there was a certain stability about the broad economic indicators. Sure, several sectors of the economy showed signs of weakness but inflation was coming down steadily, GDP was holding on, and benign oil prices had helped it meet stiff fiscal deficit targets. While exports were anaemic, imports had also slowed (to an extent because of lower oil prices) and trade and current account deficits were narrowing.
Of late, though, there are worrying signals that even as GDP growth is finally picking up, the overall economic indicators are taking a turn for the worse. Trade and current account deficits have started rising even though exports are rising. Essentially, high oil prices and other imports have caused the gap between exports and imports to rise. Inflation - both Consumer Price Index and Wholesale Price Index - have started rising beyond comfort levels. The Index of Industrial Production is showing a weakness in manufacturing. The rupee has also fallen sharply against the dollar and there are some signs of global portfolio investors pulling out money from the Indian market.
With a full-fledged global trade war threatening to break out, India could be caught in the middle. Meanwhile, oil prices are refusing to come down and US problems with Iran could aggravate our oil problems. With just a year to go for the general elections, the Modi government is looking at a worrying economic climate.