1 HOW DID DECOUPLED BECOME COUPLED? INDIA’S MIRACLE GROWTH DROPS

A year ago, India seemed to be firmly on the path of rapid and sustainable economic growth. Its real GDP growth averaged at 7.2 per cent in 2000–08 and 9.1 per cent in the sub-period 2005–08, which was the second highest after China among large emerging economies and significantly higher than the world GDP growth. The amazingly growing industrial production, service sector, corporate profitability and competitiveness, inflows of foreign investment, stock markets, foreign exchange reserve, overseas acquisitions and investments, exports, etc., marked India’s ascendancy to the status of a ‘miracle economy’2. However, even before the story of Indian miracle took its root, came the bursting of the asset bubble in the United States, collapse of western financial institutions and rising insolvency of the global corporate giants. The combination of these factors resulted in damaging consequences for financial and real sectors across countries. Capital markets and commodity prices witnessed sharp downward trends and liquidity in the economic system was badly hit. The negative impact of the global financial crisis is now appearing to be rapidly spilling over to the real sector of the world economy. Slowing industria