Why growth is a worry

As cyclical growth turns down and domestic policies become more accommodative, growth will pick up cyclically, albeit with a lag, but a discussion on ways to lift the trend is necessary

The growth of an economy consists of a trend (potential), and cycles around this trend. In India’s case, there are reasons to worry about both. India’s potential growth rate has moderated over the last decade. Various techniques — from statistical filters to production function estimates — suggest India’s potential GDP growth rate has moderated from around 8 per cent in 2003-08 to around 7 per cent currently, and this decline can be traced to a slower pace of investment (capital accumulation) and lower (total factor) productivity growth. 

A significant build-up of core inflationary pressures has typically coincided with periods of GDP