Every remedy has severe side effects.

There are four scenarios for the Indian economy, one bull and 3 bears, wrote M Chakravarty. After the global financial crisis interest rates were lowered, fiscal deficit went up from 2.5% of GDP in 2007-08 to 6.5% in 2009-10 and bank credit to infrastructure firms grew by 40.7%. Then oil prices soared in international trade, retail inflation rocketed and the current account deficit widened. By 2013 things were improving, helped by a slowing Chinese economy which brought down commodity, including oil, prices. "But growth started falling off from the June 2016 quarter. This was exacerbated by the shock of demonetization and later by the disruption caused by the introduction of goods and services tax (GST). What's more, bad loans from the earlier lending spree came home to roost in bank balance sheets." The bulls are hopeful that GDP growth, which fell to 5.7% in the first quarter, will bounce back as the effects of demonetization wear off and the benefits of GST begin to show themselves. M Pai agreed with the Finance Minister that growth will recover. "I share the optimism of Jaitley's remarks that the economy will grow seven per cent, in spite of lower GDP growth in Q1. Q1 was impacted by GST destocking," he said. R Sriram is especially scathing in his judgement of the "political and intellectual class" who criticise Modi. He thinks that although demonetization has not unearthed any black money, the combination of GST and real estate regulation will cleanse the system of corruption and anyway the political gains for Modi have been immense. Trouble is that more than 70% of employment is in the informal sector which cannot cope with GST. Credit ratings of small industries are being downgraded and they are facing liquidity problems because they cannot wait to seek a refund of taxes paid under GST. Economists want all businesses to become formal so that productivity can increase but if productivity per worker is increased there will be a surplus of workers. Where will all these find work, asked A Maira. It is false to say that informal businesses pay no tax when they have to pay bribes at every step, wrote U Shashikant. Bribes are taxes for services we should be getting from the state. SA Aiyar wrote that the real culprit for slowing growth is a collapse in exports due the strong rupee and the RBI should weaken the currency by reducing interest rate. There is already an extra Rs 3 trillion in cash in our banks due to demonetization so the RBI is facing difficulties in neutralising excess inflows of foreign investment. The government should allow fiscal deficit to increase to stimulate economy, wrote M Bhusnurmath. But, if our debt goes higher we could face a ratings downgrade. Policy paralysis looms. We have seen that before, haven't we?