The monsoon has been good and will spur consumption, especially in rural areas, which are already growing strongly, owing to improvements in road transport and communications connectivity. The banking sector has undoubtedly experienced an increase in bad loans, often owing to investment projects that are not unviable but only delayed. As these projects come onstream, they will generate the revenue needed to repay loans.
India’s banks have the capital to absorb losses in the meantime. Likewise, India’s finances are stronger than in the typical emerging-market country, let alone an emerging-market country in crisis. India’s overall public debt/GDP ratio has been on a declining trend, from 73.2% in 2006–07 to 66% in 2012–13 (and the central government’s debt/GDP ratio is only 46%).