During a recent breakfast with an investor visiting Mumbai from a large western fund, the conversation quickly turned to the question of the moment: what ails India?
These are bearish times in Asia's third-largest economy, but his grisly assessment startled me nonetheless. "On every indicator we look at, there is a red flag," he said, before adding with a wry smile: "This country is close to becoming the Greece of Asia."
It was a strikingly pessimistic statement, even if made half in jest. But the list of indicators is beginning to look very dire indeed. Growth has stalled. Inflation, thought to be under control, jumped up again on Monday. Data last week showed industrial output declining and the trade deficit growing. This week the rupee fell to its lowest rate ever against the dollar.
For foreign investors the situation is especially stark. Regulatory risks are rising in sectors such as telecoms, while capital inflows have collapsed in the midst of heightened uncertainty over proposed tax changes.
The looming resumption of Vodafone's five-year battle with the tax authorities is only the most prominent example of a government that seems to rise from its torpor only occasionally to unveil opaque but menacing new regulations.
All of this comes at a time when India badly needs foreign capital to fund its current account deficit, which will rise to about four per cent of gross domestic product this year. But the slowdown is just as visible in a domestic corporate sector that increasingly prefers to invest abroad. Indian business leaders used to call their nation's economic story "Indian shining". Not any more.
At one level, of course, the idea of India as comparable to Greece is absurd, as the grin on the face of my breakfast companion confirmed.
Most economists predict growth of about seven per cent this year. Exports dipped in March, but still shot past a government target of $300-billion (U.S.) for the past 12 months. Any politician in Athens would look enviously at the rupee's recent depreciation, which should in time help to ease current account pressures.
But the manner in which India's growth story has fallen apart - with GDP falling from a peak of above nine per cent to just over six per cent in the last quarter of 2011 - remains surprising. So what is to blame?
Government weakness, the backwash from the euro zone crisis and increases in oil and commodity prices all play an important role. But it is clear there is a deeper problem, in which the very system governing reform and investment decisions has broken down.
India's first round of economic reforms two decades ago opened up parts of the economy to competition. But it left intact a system that Raghuram Rajan, an economist at the University of Chicago and an adviser to India's prime minister, Manmohan Singh, dubs "the Resource Raj". He is referring to an alliance of well-connected industrialists and public officials that between them carve up the permissions and licences that have in the past underpinned India's growth.
The Resource Raj worked well enough over the past decade. There was corruption, yes, but there was investment too. Power plants, roads and shopping malls were built, as were mobile phone networks. Corporate profits rose and for a time growth roared along at more than nine per cent. But now it is this process itself that is collapsing, as its dubious inner workings are exposed by a mixture of Supreme Court interventions, government audits, a feisty media and the public themselves, angry over graft and drift. It is no accident that so many recent scandals have stemmed from precisely the nexus in which the Resource Raj operates.
The cancellation of 122 mobile licences that now threatens to upend the telecoms sector came about because spectrum was handed out improperly. A recently leaked review from India's state auditor suggested more than $200-billion had been gifted to industrial groups via the allocation of coal rights without auctions. Similarly scathing reports could easily be written about the power and mining sectors, or the allocation of land.
Ultimately, the unpicking of the Resource Raj is to be welcomed. India's democracy is responding to the administrative inefficiency and impropriety of the old system, albeit slowly and imperfectly. It also ought not be difficult to imagine an alternative, one that at a minimum would openly auction resources such as spectrum and mineral rights.
But given the present dysfunction in New Delhi, it certainly is difficult to imagine such a system being introduced quickly. And for the nation's growth story, time is tight. Replacing the Resource Raj is not a cure-all but would be a start to get India shining again. Without it, the red flags will only grow more prominent.