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Tipping points and Goldilocks conditions

December 28, 2014

 Abstract: Two high growth phases in the Indian economy—1994-97 and 2003-08—have something in common i.e., a confluence of factors, both domestic and global, that created conditions “just right” (Goldilocks) for rapid growth. Multiple policy measures (increased capital expenditure, infrastructure development including highways and telecom), as well as    external factors (momentum due to rapid global growth, low commodity prices) worked together to create impetus for growth in the Indian economy. Not surprisingly, domestic inflation and adverse global economic conditions eventually acted as growth stoppers. To create enabling conditions for future growth, the government needs to focus on large scale infrastructure development supported by public spending as well as a substantial overhaul of the banking system.

Keywords: growth phases; infrastructure; capital expenditures

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