After Liberalizing Reforms

Pulapre Balakrishnan and Ashima Goyal point to domestic factors rather than the global economy as the source of the growth slowdown in the last decade. It follows more importance needs to be given to domestic demand and to difficult domestic reforms such as improvements in governance. Since macroeconomic policy has impacted growth, attention to the interaction between the two would also yield dividends. To do so, the inflation forecast targeting regime requires to be flexibly implemented with supportive government action to relieve supply-side restrictions.