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You might say the Indian economy is on a knife-edge. It has, at one level, started out as a blockbuster year and growth is ripping along at a spectacular rate.
Everyone from carmakers to real estate developers are reporting bumper profits. To cap it all, the deal-makers have swung into action.
So you have Britain's Vodafone making a triumphant entry into India with an US$11.1 billion ($15.6 billion) deal to buy a 67 per cent stake in telecom company Hutch India from Li-Ka Shing's Hutchison Group.
And before that came the audacious acquisition of Anglo-Dutch steelmaker Corus by India's Tata Group (which provoked the inevitable headlines about the empire striking back).
In fact, the "India buzz" is so high that Hutchison Telecommunications International's stock price fell in Hong Kong when the agreement to sell Hutch India was announced.
Conversely, Vodafone investors may worry about chief executive Arun Sarin overspending but they gave this deal the thumbs up.
If that's not enough, the champagne corks are also popping at another giant conglomerate, Hindalco, run by industrialist Kumar Birla. It has just pulled off a surprise coup by snapping up Canadian company Novelis for US$6 billion. When the deal is finally sealed Hindalco will be the world's fifth-largest aluminium producer.
And yet there are dark clouds appearing on this seemingly sunny horizon. That nasty beast inflation is rearing its head and the inflation fighters are unsheathing their flashing swords.
Inflation hit 6.63 per cent this month (considering that Indian statistics are often inaccurate and behind the curve, economists say it's probably much higher).
What's worse is that rising prices have hit the most basic food products such as onions, wheat and pulses (mainly lentils). Onion prices, for instance - always a carefully watched bellwether by the political classes - have tripled in the past few months. Most alarmingly, this is a time of year when the markets are brimming with produce.
"The food bill forms a major part of the consumption basket for the less affluent. It's very hard-hitting and squeezes their budget," says D.K. Joshi, director and principal economist at leading Indian credit rating agency Crisil.
Even a first-year economics student could probably guess the next move in this unsettled scenario. Sure enough, the country's central bank (the Reserve Bank of India) has lifted its key interest rate to 7.5 per cent. Two weeks ago it also raised the cash reserve ratio that banks must maintain when lending money. The aim is to slow consumer credit growth of more than 30 per cent.
Finance Minister P. Chidambaram has been less enthusiastic about rate rises but even he knows the RBI governor doesn't have a huge stockpile of weapons in this battle.
But the monetary moves prompted one newspaper to comment: "This interest rate hike is like using a sledgehammer to kill a mosquito. If vegetable prices need to be kept down, it cannot be done through interest rates."
The Government has also moved into inflation-fighting mode by axing customs duties and ordering the state-run oil companies to cut prices - even if they take a profit hit in the process. That's tough for the oil companies, which have already been forced to absorb price rises in the past 18 months and not pass them on to consumers.
Meanwhile, businessmen are also feeling the pinch. Profits are up in almost every sector but the rising cost of raw materials such as aluminium, nickel and also oil are starting to take a toll. In fiercely competitive sectors like cars, rising costs cannot all be passed on to consumers.
Will higher interest rates slam the brakes on the India growth story? Right now, nobody's willing to put money either way. Rate increases inevitably have a cooling effect and they've also come at a time when many corporations are borrowing to fund expansions. Still, there's heaps of optimism.
Says Crisil's Joshi: "This is the strongest period of growth and most resilient on in our independent history. There have been shocks. Fuel prices have gone up and the agriculture sector has been volatile. None of that has dampened growth so far."
But the inflationary threat has focused attention on the poor and dispossessed. India is a land that is famous for its dichotomies and the economic growth story has produced its share of winners and losers.
So, you might say that the 300 million reckoned to be part of the middle class - you don't have to earn much to be part of the middle class in India - have grown more affluent. You could also flip the coin and say the 260 million people living on less than a $1 a day have hardly been touched by economic growth.
And the high inflation numbers couldn't have come at a worse moment for India's ruling Congress party. India is going through a slew of state elections that are seen as dress rehearsals for the federal elections in 2009.
In two months Uttar Pradesh, India's most populous state goes to the polls.
Congress has been in a tough fight in elections that have already been held in Punjab and other smaller states (the results have not been announced yet).
"Politically, this is a very sensitive time for inflation," says Marut Sengupta, chief economist at the Confederation of Indian Industry. "Our ruling class is in gallop mode, even if in the process it leaves the people behind. You might get away with this if India were not a democracy.
"But those who are being ignored have a vote," says M.J. Akbar, editor of the Asian Age, a daily newspaper.
This week Indian Finance Minister Chidambaram will present the annual Budget. Booming 9 per cent growth has meant that tax collections are buoyant, making his job easier than usual. But he must play it carefully so the Government can beat inflation and win elections - without spoiling the growth party.
