1. Introduction

For the view and intent of the key policymaker behind this episode of high growth and of the earlier “Great Liberalization”, see Ahluwalia (2020, 2006, 2002a).

Dynamic Stochastic General Equilibrium (DSGE) models close the full employment level of output, but then by not allowing for a substantial difference between the actual demand determined level of output and the full capacity output, and over extended periods, they lose their applicability in policymaking.

Particularly those with substantial diversity to their export and production system and which have vast underutilized or unutilized labor which is often disguised.

It is interesting that the failure of the rational expectations equilibrium approaches (REE), and the limited workability of New Keynesian Models which share parentage with the REE, brought out by the GFC and the actions that actually worked to restore economies, behavioral perspectives that build on deviations from classical rationality are being actively explored. However there is the potential to go back to rational expectations where individual behavior is considered as rational while collective not necessarily so, with collective behavior being simulated by approaches that do not shy away from modeling the interactions among individuals. The perspectives on uncertainty, the propensity to invest, and in the demand for money by Keynes (1935, reprinted 2010) as also are so-called “co-ordination” failure argument of the New-Keynesians are true to this approach.

We have defined a measure of uncertainty in the bond market of a certain duration \(n\) as \({\psi }_{n}=(\frac{{y}_{n}}{{y}_{1}}-1)/\mathrm{ln}(n)\), where \({y}_{n}\) is the yield on a bond of maturity \(n\). For various maturities, this measure is highly correlated and quite close, so that it gives a measure of the market situation rising in the buildup and during a crisis. Post a crisis that has affected the financial sector (e.g., the Great Depression and the Global Financial Crisis), when the central bank through liquidity enhancement fights to keep financial portfolios and institutions from collapse, the measure falls as well. It essentially captures the prospect/belief of an interest rate change in the future.

The deviation from the uncovered parity condition. When positive, the global capital markets show a forward premium for the dollar that is significantly and systematically larger than the actual depreciation of the currency, even in the short run.

Due to both the conflict, and China itself putting the Green agenda above growth as the recent closure of so many polluting industries would suggest.

The capability of the Indian bureaucracy and administration as a system has been low and has hardly improved over the years. Core to this weakness is the lack of autonomy within departments, the dysfunctional interface of the PSUs with the government, the ill-design of many policies and their angularity with the law. These are compounded by the orientation of the civil service—poorly valuing expertise, domain knowledge, and principles to derive actions in contrast to power, inertia, subordinated expertise, and rule orientation. Corruption, unlike the widely held belief, is not the problem as much as the result of years of dysfunctionality. Similarly, the dysfunctional behavior of the so-called “political class” itself has its roots in the ill-design of the relationship between the elected executive and the bureaucracy, and the continuous failure of the system to deliver on public services. Only exceptionally, due to the yeoman efforts of individual civil servants, who went far beyond their roles, could movements for the better take place. And these have been durable only when institutionalized. Thus liberalization and privatization (in areas of competition), which is somewhat simpler to bring about as compared to second-generation reforms (where major restructuring of organizations and the design of systems are involved) have delivered. The country awaits major second-generation reforms. There have been few successes of second-generation reforms—the National Highway Development Program, the Delhi DISCOM privatizations. Sectors like electricity, municipal water and sewerage, city and regional roads, education, and heath care continue to languish. See Morris (2002) for the issues in governance in India in the context of delivery of public services. See Fukuyama (2014) for governance in a comparative and historical framework.

The contrast between the capability shown by the Planning Commission then when Vajpayee made the announcement of “Roads from Kashmir to Kanyakumari” and to Modi’s “Swatchh Bharat”, “Smart Cities”, or “Make in India” (all of which point to issues vital for the country’s success in the economic transition) may be noted. Lately through the “Make in India” seems to have got a new life with the creative efforts of the Niti Aayog under Amitabh Kant.

Indeed the sharp contrast between the government’s response to the GFC and now to the COVID crisis is worth noting.

Much but not all of the data has been sourced from the Centre for Monitoring the Indian Economy’s (CMIE’s) Economic Outlook, a most convenient compilation of Indian data. Direct Government sources are messy, scattered, unfriendly to the electronic world, and about as difficult to download and use as can be. The time series aspect is not something that most government departments are bothered about, given the immediacy of almost all the demands put on senior civil servants.

See Joshi and Little (1996) for an early macroeconomic study of the period till 1995–96.