| Summary/Abstract |
Over the past quarter century, the Indian economy has been transformed. Economic growth accelerated beginning in the mid-1980s to over 8 percent per year in the late 2000s after averaging only 3–4 percent per annum in the early decades of India’s independence. And, as a further sign of the new strength and resilience of the economy, India appeared to manage the shock of the global financial crisis with assuredness: maintaining a 7 percent growth rate in the face of a severe recession in the United States and Europe, and growth again accelerated to nearly 9 percent in 2009–10. However, more recently the situation has deteriorated. Growth has slowed to an average near 5 percent, a pattern that is expected to hold for the near future. There has been a substantial deterioration of many of the main economic indicators; the current account and fiscal deficits have widened, and inflation has remained at an elevated level. With a slowing of observed rates of domestic saving and investment, concerns have also arisen that India’s potential growth rate may have fallen. Finally, given the large twin deficits, fears have been expressed about the possible emergence of some external vulnerability. These developments were accompanied by growing voter dissatisfaction and the election of 2014 brought in a new government.
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