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A sleepwalking economy

There is no passion for growth, and no one is taking up the cudgels on its behalf.

If you followed Indian debates over the last couple of years you would struggle to hear one simple word: growth. India has been through several crises recently. There is an institutional crisis, evidenced in debates over corruption. There is the loss of legitimacy of India’s elites. There is a social crisis as India struggles to develop norms for a new society. Each of these crises is playing out, spewing more poison on one hand, but also, in some instances, creating conditions and opportunities for renewal. The jury is out on how this dialectic will work. But one crisis seems to have dropped out of our consciousness: the economic crisis. It occupied us for a while, when the current account deficit was a headline number. Once that number nominally came under control, the economy once again passed into background noise, where the crisis still festers.

The crisis is still real. We can pat ourselves on the back and say 4 to 5 per cent growth is still good, foreign institutional investment is still coming in, we are in a better position to deal with the Fed’s taper, we adjusted well to currency depreciation and the fiscal deficit number will not look bad on March 31. But these surface truths cannot hide real anxieties: inflation is structurally endemic. India’s inflation has been higher than that of its peer economies for over three years in a row. Inflation messes with everything, from the prospects of the poor to high-end investment decisions. The fiscal deficit may not look alarming, but behind it is a story of creative accounting and arbitrary administrative suppression of payments. Many banks are tottering, with the true extent of their vulnerability disguised by creative ever-greening. The index of industrial production is still falling; the balance sheets of companies are not an encouraging mixed bag, to put it mildly. But more importantly, even if we have managed to avoid a catastrophe, we are not leveraging this historical moment to our advantage and laying the foundations for long-term success. We will pass all kinds of laws, have a new high of daily outrage, but sleepwalk through the economy.

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