So, is the India growth story over? No. We expect the economy to grow at (a still respectable) 7.8% in the fiscal year to March 31, 2012. Three important factors which will help to revive the economy are: 1. Crucially, lowering and taming the stubbornly high inflation rate; 2. This should lead to an end of the current cycle of interest rate rises and help spur demand; 3. A normal monsoon which helps stimulate demand in the economy, especially in rural areas. However, the Government's hope to ratchet GDP growth back to 9% and above this coming year looks for now an aspiration for future years. It may be worth emphasising that India took 60 years since Independence to achieve the first trillion dollars of GDP because growth averaged a paltry annual 3.5% for 30 years from 1950-80. This rose to an average of 7.3% p.a. for the last decade. India's economy by the end of this decade is expected to be over four times the figure of $ 1 trillion achieved in 2008, with growth in most sectors

David Fuller's view The major concern in India over the last eight months has been food price inflation, much of which was due to problems referred to in email 2 above.

Given the on-location evidence of sharp falls in food prices within India over the last month, if this new trend is widespread and continues, India's government should be under less pressure to make the additional interest rate hikes mentioned in the India Report's first paragraph. While short-term risks remain, not least due to slowing global GDP growth and weaker equity prices, less monetary tightening than generally expected should please India's stock market over the medium term.