Action or inaction, the government is in headlights.

 "India will see a sharp V-shaped recovery in the third and fourth quarter of the current fiscal," predicted 15th Finance Commission Chairman NK Singh. India's gross domestic product (GDP) shrank by 23.9% in the first quarter of the current financial year, ending on 30 June. "This means that approximately Rs 8.5 trillion of national income, or about $115 billion at the current exchange rate, has gone up in smoke," wrote Prof Vivek Dahejia. Just as after demonetization, this crisis will have a strong 'hysteresis' effect which means that "it will take a very long time for economic activity to return to normal if it ever does". "We need a broad set of structural reforms that address long-term challenges. For an instant uptick, however, the country needs a demand boost of a sizable fiscal stimulus," wrote an editorial in the Mint. But, reforms are not possible at this time. "No economy in the midst of a major crisis -- anything from a war to a public safety emergency, as at present -- has succeeded in pushing reforms at a time when people are simply too sick, poor or scared to respond to revised incentives to work, save, invest or innovate," wrote Dahejia. Among economists a D-word "is shorthand for depression (continuous contraction of economic growth), or for deflation, a state of falling prices", wrote Rajrishi Singhal. "At the Reserve Bank of India (RBI), the mention of a particular D-word is studiously avoided in conversations or discussions about the economy." Which is 'demonetization', whose "malign shadow continues to darken India's growth prospects". Because, "First, the deeply embedded fear of sudden and random government decisions has already jinxed investment activity in the economy." "Interventions must focus on sectors that employ large numbers and whose multiplier impacts are substantial," wrote Gowda and Satyawali of the opposition Congress party, such as manufacturing, construction and services like hotels. "The conventional Keynesian wisdom is for governments to reverse course through significant fiscal interventions." Easily said. But, the Congress was in power between 2004 and 2014, so what were the effects of its actions after the 2008 crisis. Economic growth was 9.3% in 2007-08, consumer inflation (CPI) was 6.2% in august 2008 and current account deficit (CAD) was just 1.29% of GDP in 2007-08, wrote N Rajadhyaksha. However, economic growth had fallen to 5.46% in 2012-13, CPI had jumped to 9.63% in June 2013, and CAD was a massive 4.82% of GDP in 2012-13, despite a slowing economy. Having committed one D-word in demonetization the government is petrified about another D-word, that is 'deficit' which is already set to rise to Rs 12 trillion. Hence the government is paralyzed into inactivity. Like a deer in headlights.