They challenge two of the fundamental stabilising forces that have contributed to the decline in volatility during the Great Moderation: globalisation and an elastic energy supply. Globalisation acted as a gigantic shock absorber. The breakup of the Soviet Union and global economic liberalisation from the 1980s onwards led to about half of today’s world population being integrated into the global economy.
Besides the level of liabilities relative to GDP, there are certain other features of India’s government debt that merit specific attention in the context of standard vulnerability assessments about sovereign debt.