Fixing the growth puzzle

Cyclical responses won't fix the structural constraints, and structural reforms don't address a cyclical slowdown

GDP growth slowed to a six-year-low of 5 per cent during the April-June quarter, which is weak, no matter how it is sliced or diced. Private consumption demand was hit hard, investment remains lacklustre, and export growth has slowed. This raises two issues: Reasons behind the slowdown and the solutions.

Is it cyclical or structural?

The slowdown is partly cyclical and partly structural. The cyclical slowdown is only a year old, but the structural (trend) slowdown has been ongoing for five-ten years. 

Two cyclical factors have contributed to the growth moderation over the last year: Shadow banking stress and weaker