IN 2014, the year Narendra Modi became prime minister of India, the country enjoyed gross domestic product (GDP) growth of 7.5 per cent. The economy continued to grow at a robust rate, exceeding 8 per cent in 2015 and 7.1 per cent last year, outperforming China on both occasions.

But 2017 has shown a marked slowdown, with the annualised growth rate for April to June falling to 5.7 per cent. This deceleration means Mr Modi, for the first time, has had to confront a jubilant opposition faulting his economic performance, rather than on grounds of intolerance or cultural communalism. A growth rate of 5.7 per cent is hardly a symbol of deeply damaging stagnation, but Mr Modi has raised expectations and the problems he faces are of his own making. It is unclear if the fall in the growth rate is part of a longer-term trend or due to some special factors.

Two policy initiatives disrupted growth. One was the large-scale demonetisation of high-denomination banknotes. In November 2016, Mr Modi surprised the nation by declaring that all 500 and 1,000 Indian rupee notes would be stricken out by the new year. This sudden change disrupted the large cash-based informal economy.