The world is on the brink of a recession that could perhaps be the worst since the ’30s. International pessimism is also being transferred lock, stock and barrel to India. Companies are taking a re-look at planned expansions, investment is expected to take a significant hit, and consumers are thinking again about asset purchases, and delaying taking loans for housing and other household assets. Automobile sales growth has already slowed down and may even be in the negative in the coming quarters. Marketing and advertising expenditures have been frozen or cut down, new hiring has slowed down, and some companies are also weighing the pros and cons of large-scale retrenchment.

These are not the typical traits of an economy that is expected to grow at 7-8 per cent over the next few years. A lot of this pessimism is unfounded and the result of an over-reaction that often characterises markets. The engine that powers economies is expectation, and somehow a situation has arisen where short-term hiccups are driving our actions rather than the medium- and long-term potential. Ironically, expectations can also be self-fulfilling prophecies. The mere expectation of bad times on the part of industry and policy-makers may very well lead to such a situation.

But positive economic expectations are not dictated by the gods. They are built upon solid foundations characterised by great opportunities ahead, our confidence in ourselves to find such opportunities, and in our abilities to benefit from them. And on all three fronts India scores very well.

... contd.