Indeed, in general, it is understood that India has a chance to ride this out with minimal disruption. The long-term benefits of that cannot be underestimated: first, when evaluating investment destinations, people would then think of India as being safely immune to major downturns (however inaccurate in theory); and second, a pro-reform domestic consensus would be perpetuated. Both those are important. If we can keep the policy reaction insulated from reflexive, petty politicking — such as Narendra Modi’s strange little rant on Monday against “dirty money” in FDIs — we’ve got a good shot at making hay while the sun doesn’t shine.

And, in just laying this out, we’ve developed a sense of where the biggest, most urgent bottleneck is. It isn’t in credit to the private sector, unsustainably expensive though that is, or in infrastructure, slow though the response seems to be in that sector. It’s in intellectual capacity. The overstrained establishment is expected to move with speed and agility, while keeping vital balls in the air: efforts to maintain energy security, its new responsibilities at the FSF (and soon, hopefully, the IMF and World Bank), new trade talks. It’s being watched to see if it can handle playing with the big boys, so India will have to over-achieve in meeting the requirements that the G-20 spelled out for domestic economies: transparency in accounting, for example. All this while keeping financial sector reforms burning, developing a bond market and so on. Big, heterodox ideas are needed, and many of them: do we really believe that the bureaucracy will be able to provide most of them? Nor is there any confidence that the overstretched finance and commerce ministries will be able to produce enough capacity even for things that don’t require out-of-the-box thinking.

... contd.