Good news is filtering through. The index of industrial production grew by 10.4 per cent in August 2009, FDI was $3.27 billion in August, FII inflows and IPOs are back, the Sensex has crossed 17,000, first quarter GDP growth was 6.1 per cent, the Society of Indian Automobile Manufacturers reports a jump in car exports in the first half of the financial year, salaries in the diamond sector have increased in Surat, the drought wasn’t as bad as was feared, and so on. Each such number can be questioned and, tortured sufficiently, will yield the right confession. However, there is no denying that the so-called shoots are increasingly green, not brown, and not just in India, but globally. Moving Indian growth beyond 6.5 per cent will require an export pick-up.

Having said this, the focus shifts to how we can prevent this in the future, both in India and in the world economy. This takes one to the famous letter written by the British Academy to the Queen on July 22. “When Your Majesty visited the London School of Economics last November, you quite rightly asked: why had nobody noticed that the credit crunch was on its way?... Many people did foresee the crisis. However, the exact form that it would take and the timing of its onset and ferocity were foreseen by nobody. What matters in such circumstances is not just to predict the nature of the problem but also its timing... It was a cycle fuelled, in significant measure, not by virtue but by delusion. There was a broad consensus that it was better to deal with the aftermath of bubbles in stock markets and housing markets than to try to head them off in advance.”

... contd.