It takes a crisis, and then, for ever, for India to react. Be it the domestic economy or the country’s internal security, the government’s response has unfortunately been neither bold and substantive, nor quick. The horror of the Mumbai terror attack is vivid in people’s minds and the government had to be seen to be taking action. This manifested in the ouster of some top guns and an announcement to prepare a plan to overhaul internal security. These were yesterday’s tasks, but never mind. However, the job of putting in place a crisis infrastructure to counter urban terror of this kind takes time, effort and single-minded pursuit. Is the government up to it? That time will tell, but then, it needs to be tracked closely should there be any let-up.

But as far as gross domestic product (GDP) growth rate is concerned, the first signs of a powering down of the economy were visible roughly a year ago. It was then that the US financial crisis was simmering, interest rates in India had started hurting business sentiment and the growth rate in industrial output was showing signs of stress. But, inflation expectations were high, and arguably the Reserve Bank of India kept a tight leash on its monetary policy: both the repo rate, or the rate at which the RBI lends to banks, and the cash reserve ratio, or the portion banks have to keep with the RBI, were being hiked to discourage banks from lending. Inflation control, and not growth preservation, was the mantra then: criticised by some and appreciated by others.

... contd.