INDIAN Prime Minister Narendra Modi, in his speech to mark India's 70th Independence Day on Tuesday, highlighted several achievements of his government and shared a roadmap of changes he hopes to usher in by 2022.

A more detailed assessment of the health of Asia's third-largest economy was, however, provided by the Finance Ministry a few days earlier in the form of a mid-year economic survey. The survey flagged a number of short-term risks. The major one, as already pointed out by many economists, was a distinct deflationary trend that could prevent India from hitting the higher end of its projected growth band of 6.75-7.5 per cent for the fiscal year which ends in March 2018.

India's Chief Economic Adviser Arvind Subramanian, one of the authors of the survey, noted that the deceleration trend, heading towards deflation, "isn't slowing down". India's central bank last week cut its main policy rate by 25 basis points to 6 per cent, the lowest since November 2010. However, Mr Subramanian reckoned that the rate was still 25-75 basis points above what would be a neutral rate. Thus, the cost of lending was still too high despite the policy rate cut. Given these macroeconomic conditions, there remains significant scope for the lending rate to come down.