Paranjoy Guha Thakurta
Indian economy analyst
"We must banish the thought of recession," thundered India's Harvard-educated Finance Minister Palaniappan Chidambaram on Monday before a gathering of economic journalists in Delhi.
He's technically correct. The world's largest democracy and second most-populous nation is unlikely to witness negative growth for two successive quarters in the foreseeable future.
But by India's own recent standards, the situation is far from hunky-dory.
Four years in a row, for the first time in the 61-year history of the country, gross domestic product grew by nearly 9% each year - an impressive jump from the annual 3.5% "Hindu rate of growth" (a phrase derogatorily used by the eminent Indian economist Raj Krishna) recorded during the 1950s, '60s and '70s.
During the current calendar year, the Indian economy is expected to grow by around 7%. The International Monetary Fund claims the country's growth rate during 2009 will be 6.3%.
Between April and September, the index of industrial production grew by 4.5% against nearly 10% in the corresponding six months of the previous year.
India's stock market indices have collapsed by 60% since early January as foreign investors have hurriedly withdrawn funds.
The Indian currency has depreciated against the US dollar over the past four months by more than 15% and the country's hard currency reserves have come down from a record $300bn to around $250bn over a shorter period.
The Reserve Bank of India, the central bank and apex monetary authority, after sucking out liquidity and hardening interest rates to control inflation through the first half of the year, has completely reversed its policies since September.
Still, Indian companies have realised that "cheap and easy money" is no longer there for the asking.
Manufacturers of cars, commercial vehicles, steel and chemicals are curtailing output.
The finance minister is urging cash-strapped real estate firms, hotels and airlines to reduce tariffs to spur demand. But they seem to be in no mood to listen to him.
Job losses are imminent. One major airline (Jet Airways) announced a major lay-off a few weeks ago and had to hastily backtrack following government pressure.
The government is talking of upping expenditure on infrastructure development, a strategy that was prescribed by the late British economist John Maynard Keynes to counter recession.
The pace at which India's GDP grew picked up from the early 1990s after the government relaxed its controls over the economy, described as a phase of economic liberalisation presided over by Manmohan Singh, then finance minister and now prime minister of a Congress-led coalition.
Despite the market-friendly policies pursued by Mr Singh and Mr Chidambaram, there is a substantial section in Congress that remains wedded to the party's socialist past.
This section believes the government and government-owned enterprises have an important role in the country's economy.
Further, it argues that growth has not been "inclusive" nor has it created enough new jobs.
Last week, Congress President Sonia Gandhi praised her late mother-in-law, Indira Gandhi, for having nationalised much of India's banking system four decades ago.
Speaking in Delhi, she said that "every passing day bears out the wisdom of that decision", which was much reviled at the time.
"Public sector financial institutions have given our economy the resilience we are now witnessing in the face of the economic slowdown."
The incumbent regime has of late become unpopular because of its inability to control inflation, in particular, food prices, although the rise in the official wholesale price index has slowed from close to 13% in August to less than 9% in mid-November.
Inflation has eroded support for the Congress-led coalition at a time when elections are under way in half a dozen state legislative assemblies. The country's 15th general election is scheduled for April 2009.
Mr Singh's administration has been attacked by both the right (the Bharatiya Janata Party) and the left (communist parties that withdrew support in July over the US nuclear deal) for following economic policies that are supposed to have benefited the affluent.
India is the second-fastest growing economy in the world among large countries after China. Still, a substantial section of the 1.1 billion Indians is very poor - at least one out of four survives on less than $1 a day.
Realising that the "grand old party" of India is in danger of losing votes, Sonia Gandhi sought to steal a march over her former allies in the Left by claiming that the pro-poor credentials of Congress were intact.
On Friday, she said: "What concerns us most today is that this economic upheaval could grievously affect the most vulnerable sections of our society."
She said the poor "have nothing to do with the fancy-sounding financial instruments - derivatives and credit default swaps - that have ensnared so many".
"Should the avarice of a few be allowed to inflict misery on the many?"
The Singh government has written off farm loans worth 7,000bn rupees ($14bn) and initiated a legally guaranteed employment programme for 100 days in a year for families in rural areas that is said to be the "world's largest social security scheme".
Despite these and another populist measures, the government's critics say much remains to be done to create employment opportunities and improve India's creaking social and physical infrastructure.
In large parts of the country, electricity supply is erratic, roads are in poor condition and water supply is uncertain.
The country's health-care and elementary education systems are badly hamstrung for resources.
Agriculture, which provides more than half of India's population a precarious livelihood, has grown at a relatively tardy pace.
Thousands of farmers committed suicide in recent years because of their inability to repay loans obtained from local moneylenders at usurious interest rates.
Whereas the services sector - led by fast-growing computer software and business-process outsourcing companies - are feeling the pinch on account of recession in the West, other labour-intensive export-oriented industries such as textiles, handicrafts, leather and processed foods face shrinking markets in North America, Europe and Japan.
The fact that India's economy is less integrated with the rest of the world is serving it in good stead as a financial tsunami sweeps the globe.
At a time when capitalism is in deep crisis, many in India ague that the world would benefit from following India's "mixed" economy that seeks to assimilate the best of free-enterprise and socialist policies.
Difficult times lies ahead. It is small consolation for India's underprivileged that the country is doing better than most others.