Past experience with financial crises episodes suggests that growth and investment rates typically remain below the pre-crisis levels and potential growth rates take a hit. Similar dynamics are at play in the aftermath of the recent financial crisis. There is a perception that potential growth rates of advanced economies are likely to be lower than their pre-crisis trends.
If so, given the growing trade and financial  BIS central bankers’ speeches  5  globalization, potential growth rates of the fast-growing emerging market economies can be expected to be lower than the pre-crisis trends. Against this backdrop, it would be useful to re-assess India’s potential growth rate consistent with our objective of low and stable inflation.