The rave party of select Indian economic sectors was arrested some weeks ago by the global crisis.
The minders of the economy, the dream team of Manmohan Singh and until recently, P Chidambaram, were into denial initially, but have lately started accepting the reality, much like the celebrity parents of those arrested in Mumbai.
They assure us that we are not into recession and will bounce back soon, in view of all the corrective actions, but the bad news continues to get worse.
This raises questions regarding the reliability of these assurances and the relevance of the correctives.
India's growth has had three distinct epochs: the first, from independence to the 1980s, is the period of traditional Hindu growth rate of around 3 per cent a year.
We then graduated to a secular era of 5 to 6 per cent into the present century.
Since 2003-04, we claim to have entered a sustainable post-modern golden age of 7 plus per cent growth a year, inching ever so close to the magic double digit rate.
We have never really understood that this last high growth phase is the result not so much of our intrinsic strengths as it is due to the star performance of one specific sub-sector and the opportunity it afforded to a small minority to realise its aspirations.
The year 2003-04 was the watershed year for exports, particularly of services.
Exports grew at 20 plus per cent a year since then, until the recent fall. The share of other items including services was 8 per cent in 2003-04 and 15 per cent two years later, in 2005-06 on a base one-and-half times as large.
The 2007 Economic Survey explicitly acknowledged this:"Such exports have increased three-fold in the last three years. . . Growth has been particularly rapid in ... miscellaneous service(s)...compris(ing) software...business...(and) financial services."
This impressive export growth could not have caused by itself the steep increase in the GDP.
That is the result of a significant multiplier effect.
It was not thought fanciful until recently that young engineers armed with appointment letters from software companies could walk into banks and secure car loans, driving to work in brand new cars on the very first day.
Transport and communication accounted for 13 per cent of the private final consumption expenditure in 1999-2000. This jumped to 17 per cent in 2004-05.
Food and related items accounted for 53 per cent of the consumption expenditure in 1999-2000, which share fell to 42 per cent in 2004-05.Discretionary expenditure on transport, clothing and recreation went up from 24 per cent to 32 per cent in the same period.
Automotive and textile sectors grew at double digit rates, as did consumer durables. New brands, models and outlets experienced a mushrooming growth.
Housing market boomed and prices touched astronomical levels in not just the metros but Tier 2 cities as well.
Much of this boom was financed through loans, to be paid back in equated monthly instalments, which the borrowers mistook to be easy monthly instalments.
This was in essence the Indian elephant sprinting on steroids.
Indians always had high aspirations; since 2003, some of them had the purchasing power to back it.
They were spending much larger proportions of their increased income on fulfilling their aspirations. No great analysis is needed to identify the population segment engaged in this behaviour.
The cheek-by-jowl coexistence of the high-income gated enclaves and squalid slums is telling. Farmers and their dependents, more than one half of the country's population, had little time and less motivation for such consumption, busy as they were coping with vagaries of nature and fluctuating agricultural production in the same period.
The impact of the recession in the OECD countries is the hardest on those who never had it so good in India.
International banks have deferred software purchase and outsourcing; automakers have cut back their component orders. Star Indian corporates would postpone, but not avoid, the day of reckoning when pink slips replace voluntary salary cuts.
The venerable Infosys is encouraging its employees to go on a sabbatical for a year at half pay. All auto majors have cut work weeks. Others would not be so kind.
The reverse of what holds good in booms is unfortunately true in busts: discretionary expenditure will contract. Vastly reduced car, scooter, and housing purchases will follow shrunken or vanished pay cheques and disappearing credit lines.
Even more important than such direct impact is the depression mentality highlighted by Paul Krugman.
There would be a great reluctance in these hard times to commit to such expenditure even on the part of those not so badly affected, say the government staff who will receive the pay commission arrears.
The net effect is a spiralling negative multiplier effect on all those factors which drove the Indian economy to new heights until now.
The growth points added most recently will be the first one to be shaved off, and at a faster clip. Aspirations will turn into exasperation.
Some people advocate the priming of the pump by increased public spending on infrastructure.
This is not going to do the trick, in view of the long gestation period compounded by our extraordinarily dilatory decision process.
Further, those who stand to benefit directly from such expenditure are not the same people who will suffer from the impending downturn.
The whole gamut of financial sector incentives and packages on offer will at best address the problems of the manufacturers.
They will do little to restore the momentum of a demand-driven economic growth. Chidambaram had said that public sector banks would expand their retail lending.
Whether the badly burnt consumers would take the bait remains to be seen.
In effect, what is proposed is to shore up the needle growth edifice at best (at worst, the solutions do not even address the basic problem).
No one thinks that the best way to protect the needle is to build a pyramid around it, that is, make the growth more equitable. We have to realise that our 'sound fundamentals' deliver a 6 per cent growth which is no longer adequate to do this.
It does not create enough employment opportunities of the kind we need. China seems to understand this. What we have seen so far is the widening of the gap between Gurgaon and Jhoomri Talaiya.
Inclusive growth is chanted daily as a mantra, without appropriate actions. That is not going to put Humpty Dumpty back together. Have the king and his horses and men realised this?