STAGFLATION, IT IS

In November 2019, former Prime Minister Manmohan Singh had, probably for the first time, raised the possibility of India facing stagflation. In a column, the former prime minister, also a renowned economist, wrote: “Continued increase in inflation combined with stagnant demand and high unemployment will lead to what economists term as ‘stagflation’, a dangerous territory from which it becomes very hard for large economies to recover.”

Not many had taken his warning seriously. Retail inflation in the previous month was below 5 per cent and despite less than 5 per cent GDP growth in the September 2019 quarter, no one was ready to believe that the economy was facing anything resembling stagflation – in fact, many felt India was facing disinflation as retail inflation was in the 3-4 per