This is the latest post on my evolving thoughts on the Indian economy. I'll have two posts on this. The first will focus on the expectations about the trajectory of economic growth going forward and the second on some emerging trends in the quality of economic growth.
The results suggest that a combined deceleration in neutral and investment-specific technology growth post 2016, brought down the potential growth to around 6 per cent in 2020Q1. The output gap also witnessed a persistent decline since 2018Q1, primarily due to weak demand and a rise in investment adjustment costs reflecting heightened stress in the investment and financial sectors... We find that the long-run efficient output is a better estimate of potential output... According to this estimate, potential growth in India witnessed a sustained increase from 2002 to 2007, and remained subdued thereafter... We also find that the sudden uptick (2002 onwards) in potential growth is mainly driven by neutral growth.