New Delhi, April 5 -- Financial crises come in all shapes and sizes-and occasionally as part of rescue packages. The International Monetary Fund's austerity package after the 1997 Asian foreign exchange crisis sent many South-East Asian nations reeling, giving rise to multiple unintended consequences. Likewise, India's reaction to the 2008 financial crisis seeded a domestic banking crisis which, among other things, spelt political disaster for a two-term government.

The 2008 crisis required the Indian government to launch a stimulus programme which involved pumping in large amounts of cash to various segments of society. When the resulting liquidity bulge and demand spike bumped up against supply-side gaps (such as manufacturing capacity...