Column: In everyone’s interest

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: and there is no reason why it can’t continue in a long-term trend sense, the present downward trend in the cycle is a separate point altogether. As evidence of growth not being sustainable, the inflation bogey was raised.

And it was no more than a bogey, especially if one accepts inflation was 7%, not 12%. To the extent inflation was an issue, it wasn’t because supply was short of demand, except agro products, where monetary policy wouldn’t have helped. Inflation was largely because of global factors, be it oil or be it other commodities. Even before Wall Street’s crisis, these price increases were easing off. At the time of writing, the $700 billion bailout in US is still uncertain. But what is uncertain is the form the bailout will take, the pricing of assets and how it will be funded, not that there will be a bail-out. So we are looking at lower global growth, lower growth in US, dampened oil prices and reduced prices for other commodities, too. The answer to the decoupling argument isn’t one that is in black and white. India’s real sector is much more insulated from US developments than one often thinks. But it isn’t completely insulated. Hence, perhaps half a percentage point, or even one, is shaved off from Indian growth rates too. It will be more difficult for Indian companies to borrow abroad and some infrastructure projects will suffer, in the sense of being delayed. Decoupling is largely true for all the BRIC countries.