Great uncertainties confronted economic forecasters in 2017. Early in the year, there were endless debates on the pace of remonetisation and the duration of economic disruption it caused. Then came the tumultuous transition to the Goods and Services Tax (GST), which subsumes 40% of India’s total taxes and, thus, significantly impacts economic growth as well as fiscal health. Separately, the unexpectedly rapid pace of build-up in the new insolvency pipeline, and recapitalisation of public sector banks brought uncertainty into the outlook for the banking sector. This, as the economy continued to adjust to low food inflation which depressed farm income growth, and the arrival of a real estate regulator, which slowed down the new launches.
All this while, aided by the strongest global economic recovery in seven years, continuing accommodation by developed market central banks, and several sector-specific trends (the expectation of continued market share losses by government-owned banks to private sector banks, or reduced competition in the telecom sector) the market showed remarkable strength a