This suggests that the positive credit gap at times was co-synchronous with negative output gap. While negative output gap would suggest that the economy was in a downswing requiring expansionary monetary policy, positive credit gap trending upwards would, in a mechanical sense suggest application of capital buffers.
This suggests that a more nuanced approach is required in the case of India, and, possibly, other EMEs, to counter procyclicality. It would also seem that the sectoral approach would be the more appropriate one as we have found in India.