Business slowed slightly at the end of the 2016/17 fiscal year due to surprises decisions taken by the Modi administration in an effort to promote the demonetisation of the economy. In 2017/18, activity is expected to pick up. Consumption should rebound: it should continue to benefit from moderate inflation and transactions should return to normal levels after the tensions associated with the demonetisation measures. Improved financial integration of the poorest households will support demand. Moreover, harmonisation of the VAT at the federal level, planned for mid-2017, should also promote exchanges. Furthermore, despite the slight rise in oil prices, investment should continue to benefit from the weakness of commodity prices and the impact of reforms undertaken by Narendra Modi's government, which aim to promote the Indian manufacturing sector, attracting FDI and mitigating the constraints on the economy. However, progress is slow and the reforms implemented to clean up the banking system continue to affect the supply of credit, despite the loose monetary policy of the Reserve Bank of India (since January 2015 the key rate has been lowered by 175 basis points). Thus, private investment would remain below its potential. The infrastructure development plan including road, rail and electrical infrastructures should allow for significant public investments. However, budgetary constraints and delays of the reform on the grounds will limit the progress of these projects. In addition, exports should continue to suffer from a lack of competitiveness and sluggish global demand.

Despite the desire to consolidate public accounts, the fiscal deficit and public debt level remain high. Nevertheless, the country has initiated a plan to reduce the deficit and lower public debt. These fiscal consolidation efforts are facilitated by low energy prices. In addition, measures to demonetise a portion of outstanding bank notes should improve budget revenue by reducing the weight of the informal economy.

Following the legislative elections in May 2014, which saw the BJP (Bharatiya Janata Party) win by a large majority, N. Modi was appointed Prime Minister and his party holds an absolute majority in the lower house of parliament. Elections in several important states confirmed the popularity of the BJP but the party has experienced several electoral setbacks, especially in Delhi and Bihar. The Congress Party continues to dominate the Upper House which is delaying the reforms long-awaited by the business community, which responded very positively to the election of N. Modi. Nevertheless, the popularity of Prime Minister Modi deteriorates while he withdrew, without notice, the ability to use certain bank notes so that they could be demonetised.