The Initial Conditions Today, the Indian economy basks in macroeconomic stability with a configuration that could be the envy of peers: a fiscal deficit steadfastly consolidating towards a Maastricht-like rendezvous with a strong consensus that its quality matters; inflation below target, shepherded by an MPC committed to the centre of the band notified by government; a current account deficit below 1 per cent of GDP and sustainable in terms of a dashboard of external sector indicators – overall, a sweet spot by any consideration!
Yet, just four years ago, an ocean of vulnerability engulfed the economy. The situation around the “taper tantrum” seemed so dire that even a growth rate of 6.6 per cent and foreign exchange reserves of close to US $ 300 billion seemed like matchsticks before a tide that swept India into the infamous ‘fragile five’ in that fateful summer of 2013.