Politics A Poor Guide To Indian Economy: Morgan Stanley’s Ruchir Sharma

Seventy years after Independence, India has changed in many ways, but is more or less the same in one: there is no connection between politics and economics, according to Ruchir Sharma, chief global strategist at Morgan Stanley Investment Management.

In an opinion piece for The Times of India, Sharma said that the outcome of elections remains irrelevant at least from an economic standpoint.

“Going back to 1981, when state GDP numbers first became available, records show that even if chief ministers delivered an annual economic growth rate faster than 8 percent, they faced a 58 percent chance of getting tossed out of office,” said Sharma.

Modi’s elevation as the prime minister, Sharma said, fuelled expectations that he would have a dramatic effect on the country's economic prospects. “Yet, for all his power, Modi is having much less impact on the economy than either his detractors or supporters imagine.”

The main reason India is still growing at a decent pace is strong consumption, which is playing an increasingly large role in driving the economy. “The share of private consumption in the Indian economy has grown from 55 percent in 2008 to 60 percent now,” Sharma said.

The trend was also reflected in the stock market where the consumer staples sector rose more than half and gave highest returns, he said. This has no relevance to politics since in developing countries, the state usually plays a large role in investment projects but has little direct sway over consumer choices, Sharma said.

“India's economy now seems to move like a vast oil slick on the global sea, far too broad, far too hard to grasp, to be contained or even shaped by any one leader sitting in Delhi. As of 2010, there were 78 countries growing faster than 5 percent, now there are just 28 and India is one of them,” Sharma said.