Over the past few weeks, optimism about a sustained, even is slow, global recovery, has been giving ground to concerns about another imminent slowdown. One thing that we learnt from the events of 2008–09 was that India is not immune to global turbulence.
Be it through trade, capital flows or a general sense of confidence about economic prospects, a global problem quickly becomes a domestic one. Given these linkages, the risks from the global economy need to be taken into consideration while formulating domestic policy. Second, the reality is that the policy instruments are far from being in a normal position.