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India economy roars back but price rises threaten recovery

A surge in festive spending has boosted hopes that India will regain its title as the world’s fastest-growing large economy, even as analysts warn of deep challenges facing a country whose consumers and businesses are still bruised by the coronavirus pandemic.

Sales over Diwali, the Hindu festival of lights that was celebrated last week, surged to a record Rs1.25tn ($16.8bn), according to Nomura, a 75 per cent jump from last year and well beyond the usual 20 per cent year-on-year growth.

The surge underscores how economic activity has rebounded sharply, contributing to the bullish mood. This has been due in part to a big drop in daily Covid-19 cases to about 11,000, from 400,000 in May when a brutal wave of infections overwhelmed health systems.

Other indicators, such as mobility and electricity demand, have also bounced back. But economists are divided over how sustainable the rebound is, as rising prices pinch consumers and…

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