Did India suffer so little in the Great Recession that laid low the biggest economies of the West?

India has successfully weathered the great financial crisis of September 2008. Indian gross domestic product (GDP) has grown around 6% in every quarter of the most difficult 12 months in recent history. Most countries suffered an outright fall in at least one quarter. When comparing India's performances in the Great Recession and Asian financial crisis,the latter, India's GDP growth fell to just 4.5% in 1997-98, of which 1% was a boost from the Pay Commission. Today, the annual rate of growth exceeds 6%, of which 0.5% is a Pay Commission boost. That's a big improvement.

Why did India suffer so little in the Great Recession that laid low the biggest economies of the West?

First, Indian banks and financial institutions had almost entirely avoided buying the mortgage-backed securities and credit default swaps that turned toxic and felled western financial institutions.

Second, India's merchandise exports were indeed hit by the Great Recession - they declined by around 30%. But service exports did not fall - computer software and BPO exports held up well. This provided an important cushion to Indian exports.

Third, remittances from overseas Indians continued unabated, hitting a record $46.4 billion in 2008-09, up from $43.5 billion the previous year. The 2008-09 flow was 4% of GDP. So, emigration (including the so-called brain drain) plus policies to eliminate the black market premium on the dollar now provide a huge balance of payments cushion.

Fourth, foreign direct investment remained high at $27.3 billion in 2008-09 despite the global financial crisis. Financiers reversed flows into India, but long-term investors in plant and factories completed their ongoing projects. Lesson: foreign direct investment is a stabilizing force.

Fifth, monetary policy, which was savagely restrictive in 1998, was accommodating in 2008. In 1998, to check a run on the rupee and penalize banks trying to hoard dollars, the RBI raised the bank rate and cash reserve ratio of banks hugely. This sucked out liquidity, and interest rates skyrocketed as it was terrible for industry. By contrast, the RBI in 2008 did not tighten money to save the rupee, which was allowed to fall from Rs 40 to Rs 52 to the dollar. Instead, the RBI lowered interest rates and expanded credit. The government cut excise duties to stoke demand. This combination of easy fiscal and monetary policy cushioned the shock to the economy in ways that were missing in 1997-98.

All this shows India weathers the financial crisis. Do you think India has still to do? share your views...