Endnotes

¹Several observers, led by Surjit Bhalla, had been pointing out since May 2008 that inflation, which had gone as high as 12.3% at the end of June 2008, was largely imported and a result of global commodity price hikes. Therefore, inflation had little to do with India’s own rate of economic growth, which started to slow down in the third quarter of FY2007–2008 after reaching the highest level of 10.6% in the second quarter of the same fiscal year. See Bhalla (2008).

²For detail, see Wolf (2008)

³The exports from these countries have registered a contraction of more than 35% in the last quarter of calendar year 2008.

⁴For details see Kumar et al. (2009).

⁵The countries were selected based on the availability of information and the size of their economy.

⁶The peak import duty on manufactured products was slashed from more than 200% in FY1990–1991 to about 10% in FY2007–2008. Quantitative restrictions on imports have also been gradually phased out.

⁷The RBI, under the leadership of Dr. Y. V. Ready, has acted very proactively many times. In 2006, when land purchases were skyrocketing, he imposed a ban on the use of bank loans for land purchase.

⁸The Bombay stock market is often referred as Dalal Street.

⁹Monthly inflows of actual ECB are not available.

¹⁰Here it should be noted that around 63% of decline in foreign exchange reserve can be attributed to valuation, hence the actual decline in reserves is just around US$20 billion.

¹¹Until September 2008, a few economists, along with some forecasting agencies, were projecting a very healthy growth rate for the financial year 2008–09. During a seminar organized by ICRIER on 19 September 2008, Dr. Surjit Bhalla predicted that India would grow by 9.0% while in the same seminar Mahesh Vayas of CMIE projected a growth rate of 9.4%.

¹²Recently the growth rate for third quarter has been revised from 5.3% to 5.8%

¹³This has been developed by the macro group in ICRIER. Using the LEI methodology we predicted a growth of GDP at 9.2% for FY2007–2008 in November 2007. Most other agencies had predicted a lower growth rate of 8.5% or below for the same year against the actual growth rate of 9%. Again in FY2008–2009, ICRIER was the first among all Indian forecasting agencies to point out the economic slowdown. Based on our model, we projected a growth rate of 6.3% for FY2008–2009 against the actual figure of 6.7%. For details see Kumar et al. (2009).

¹⁴This is the direct fiscal burden of the three fiscal stimuli and does not include the indirect burden.

¹⁵The repo rate is a rate at which the RBI offers overnight liquidity to banks.

¹⁶The reverse repo rate is the rate that RBI pays on overnight funds deposited with it.

¹⁷For details see Kumar et al. (2009).

¹⁸The Indian government formulates a blue print of economic activities for five years in advance. This blueprint is popularly known as a five-year plan. So far 10 five-year plans have been completed and the XI plan is under implementation.

¹⁹It is argued by some observers that the policy response was delayed because the government was initially somewhat in a state of denial, believing that the global crisis would not affect the Indian economy as its banking sector was not at all affected. It was argued that the net contribution of trade to GDP growth is negative and hence the turmoil in the global market would not have any major impact on India. However, a sharp deterioration in some key sectors came as an eye opener for the government and it finally started responding to the crisis in December 2008.

²⁰HP filter technique has been used to calculate the potential GDP growth and output gap.

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