The third question — where will the American/European financial crisis go next — is of course in the category of unknown unknowns right now. State support, state guarantees, not only of deposits but debts and inter-bank transactions, coordinated action, etc, cheered Asian and European markets and pushed US stock futures — bets on where the US market will go once in opens — up. It could be that the trillions of dollars now promised and some of which is already being infused, in Britain, for example, will stop anxiety feeding on anxiety. On the other hand another big financial firm announcing its near-demise could turn sentiments. Much also depends on whether the US takes direct stakes in financial firms — markets want that. India is a news-taker on this front. Bad global news may require some domestic intervention if the mood turns really panicky. Otherwise, official energies should be on, apart from the short-term liquidity problem, the medium term economy problem.

Growth prospects are not good locally and while some amount of slowdown is inevitable, early policy changes can make a considerable difference. Clearly, RBI is now fully engaged on the interest rate issue. There may be some indications on this relatively soon. Structural reforms at a time of slowing tempo are great mood enhancers and, more, they do the ground work of a better recovery when the business cycle turns. As politicians start writing electoral futures contracts, that’s what they should remember.