According to some reports India is expected to become the 7th largest economy by 2015 and the 4th largest by 2020, overtaking Germany, France, and the UK.

The relatively benign domestic macro environment has been jolted by: 

1) Investment decisions being deferred; 

2) Inflation remaining sticky and interest rates edging higher; 

3) Current account deficits back to historical highs and composition of capital flows deteriorating; and 

4) Risks to further fiscal consolidation.

ut Not Enough to Derail the Story — An increase in wage incomes both at the rural and urban level could partially offset the rate/inflation impact and support consumption. 

While investment decisions have been deferred, there are reasons tobelieve that development will take place albeit with a higher price and deferred orders will likely be implemented in FY12. 

The GDP growth could remain relatively stable at 8.6% levels in FY12.

Although prices could moderate once supply shocks ease, its composition reveals that persistently high prices appear to have a structural as well as cyclical component. This, coupled with higher oil prices, is likely to result in inflation being sticky at 6.5%-7% with an

upward bias. 

The RBI is likely to raise rates by a minimum of 75 bps in 2011 taking repo and reverse repo rate to 7% and 6% by Dec 2011. In addition to upside risks arising on account of domestic inflation, is the possibility of global central banks advancing their rate hiking cycle.

Opportunities: Economics and India's Growing Role in the World Geopolitical Order — India has moved up in the geopolitical map with diplomatic visits from all the P-5 nations in 2010, with each of these visits ending with a number of deals being inked; enhancing economic, trade, and energy ties.

Much of this rising interest is derived from recognition of the country’s growing role in the global economy. 

India is expected to become the 7th largest economy by 2015 and the 4th largest by 2020, overtaking Germany, France, and the UK.

India has, in the last decade, seen both near-term and long-term obstacles pop up. However, these have been consistently overshadowed by larger and broader opportunities. This tussle – exacerbated in 2H10 – will persist through 2011, but opportunities will continue to overwhelm these obstacles.