<b>Ajay Shah:</b> Strategy for 2017

Private corporate investment holds the key to business cycle conditions in India

Difficult business cycle conditions have prevailed from 2012 onwards. Investment is weak, and there is stress in one-third of the corporate balance sheet and three-fourths of the banking balance sheet. The demonetisation shock will weigh on 2017-18. How can policymakers respond to this situation? Fiscal policy is largely ineffective. While there is a case for rate cuts, monetary policy will not make much of a difference. This is a time for economic reforms.

From 2012 onwards, India has experienced a business cycle downturn. Recessions in India feature a mix of low investment and low corporate profitability. An additional feature that has