ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Has India's Growth Story Withered?

This paper analyses the growth performance in India over the past two decades. It uses several statistical and economic methodologies to estimate the growth rate of potential output. The annual growth rate of potential output is estimated for 2011 to be in the range of 7.7-8.2%. All the estimation techniques suggest that there was a big boost to potential growth between 2002 and 2007, but since then it has not increased significantly. Based on statistical approaches and conditional on moderate annual growth forecasts of 7-7.5% between 2012 and 2014, there is some evidence that the recent decline in growth is likely to be driven by structural factors. Most of the methodologies indicate that the output gap continues to be positive, suggesting caution in further loosening of the monetary policy stance. Overall, while the Indian growth story may/may not have withered, the evidence does give indications that the growth story may have faltered.



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