The Indian economy, once one of the fastest-growing economies in the world, is now crippled. It is, as Arvind Subramanian, the former Chief Economic Advisor to Prime Minister Narendra Modi says, “headed for the Intensive Care Unit.”
In a draft working paper titled India’s Great Slowdown: What Happened? What’s the Way Out?, published by Harvard University’s Center for International Development, Arvind Subramanian and Josh Felman, write:
Seemingly suddenly, India’s economy has taken ill. The official numbers are worrisome enough, showing that growth slowed in the second quarter of this fiscal year to just 4.5 per cent, the worst for a long time. But the disaggregated data are even more distressing. The growth of consumer goods production has virtually ground to a halt; production of investment goods is falling. Indicators of exports, imports, and government revenues are all close to negative territory. These indicators suggest that the economy’s illness is severe, unusually so.
They argue that “India’s economy has been weighed down by both structural and cyclical factors, with finance as the distinctive, unifying element,” and is suffering from, what they call, a “Balance Sheet Crisis.” Their robust analysis of the current state of the Indian economy is similar to the analysis presented by the International Monetary Fund’s Chief Economist, Gita Gopinath, who said:
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