With a brisk 7.2% GDP growth last year, India was running at twice the rate of the world’s largest G20 economies.

And with a 6.1% growth in the first quarter of this year, India -- now the fifth largest world economy -- will be a shining example of economic performance when it hosts the G20 summit next September in the company of mismanaged E.U. and U.S. economies.

Maybe -- after warmly embracing and sternly lecturing Russia’s President Vladimir Putin that this is not a time of war -- the Prime Minister Narendra Modi can show his colleagues how you leverage the West’s sanctions to make huge amounts of money. And how, while doing all that, he stays true to India’s “middle path” Buddhist beliefs and Jawaharlal Nehru’s Panchsheel Principles.

More on that later, but first a look at binding economic and political constraints that Modi must address to keep India on a sustainable noninflationary growth path.

Stable growth needs sound public finances

To start with, India’s fiscal policy needs serious correction. Addressing a dangerously high 9% of GDP budget deficit will require deep cuts and an unswerving spending restraint.

The time to do that is now, while the economy is still growing at a fast clip. In fact, it is very unusual to see such an exceptionally large gap in public finances when the economy is growing well above its noninflationary potential.

Public debt, at 81% of GDP, is not such an urgent problem, but it is significantly above the BRICS average and much higher than in similarly credit rated developing countries.

India’s unbalanced external finances also need attention. The deficit on current transactions with abroad rose last year to 2.6% of GDP, as a result of an excessive stimulation of domestic demand – drawing a strong imports growth.

That deficit indicates a shortfall of domestic savings to finance investments. It’s an important macroeconomic disequilibrium called the savings-investment gap.

In national accounting terms, it shows the amount of foreign savings the country must import – by selling its debt instruments – to make ends meet. That, of course, is a serious problem because investments set the stage for future noninflationary economic growth. And in the case of India, investments are only about 28% of GDP – a share much below the one in some major east Asian countries, and nearly less than half of that in China.

That problem cannot be alleviated by fiscal incentives to foreign direct investments to rev up the manufacturing sector because of India’s large budget deficits. And importing foreign inputs needed to set up and operate manufacturing ventures also cause trade deficits due to apparent difficulties of selling locally produced exports.

On the monetary side, India’s central banking authorities recently paused their credit tightening cycle with the policy interest rate of 6.5%, as inflation in April came down sharply to 4.7%, from 6.5% in January, on declining prices of food and energy. For the Reserve Bank of India, inflation is now in the middle of its 2% to 6% “tolerance range.”

Urals oil is a key input to growth

Inflation outlook looks good. An expected “normal” monsoon season should keep food prices stable in the months ahead, while energy prices continue to fall as a result of soaring crude oil imports from Russia. Those imports are now estimated at more than one-fifth, and counting, of India’s total oil imports.

Energy trades are a powerful stimulus to Indian economy. They are a major factor in pushing inflation down and increasing the households’ purchasing power. As a result, this year’s first quarter GDP growth was mainly driven by private consumption, exports and reviving manufacturing activity.

Thanks to rapidly rising imports from Russia, India’s oil refiners are now increasingly important suppliers of diesel, jet fuel and gasoline to the E.U. and the U.S.

That has raised delicate trade and political issues. Middle East oil producers apparently complain about being squeezed in their traditional markets, while the E.U. and the U.S. are not happy with India’s non-aligned position toward Russia and the Ukraine war.

India’s response is simple, and it’s called “strategic autonomy” -- a broader, more specific and updated concept of nonalignment India originated in the middle of the last century.

Instead of toeing the Western line, India sees a “return to history” in a “multipolar world,” where it wants to “engage America, manage China, cultivate Europe and reassure Russia.”

A vast program indeed, guided by the founding father Nehru’s key policy principles stemming from the U.N. Charter: equality, peaceful coexistence and non-interference in other countries’ internal affairs.

India apparently believes that its multipolar “return to history” is the best way to serve the overriding objective of economic development in the world’s largest democracy.