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This year, India will experience only 5 percent growth – the lowest in a decade. Foreign investment has fallen by nearly two-thirds in the past year, and the rupee has plummeted. Although short-term protectionism may appeal to domestic constituencies as the campaign begins for next year's elections in India, history has proven that such policies are inconsistent with a dynamic economy that generates wealth over the long-term. And given the state of its economy, this is hardly the time for India to alienate foreign investors.
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“During the housing boom of ’04 and ’05, you would hear people go out with real estate agents who said, ‘Your income lets you buy an $800,000 house,’” Holcombe recalls. Most people would go ahead and buy a house at the highest end of what they could afford, while just a fraction would hold back and say, “We’re only going to buy a house based on one income,” Holcombe says. The people who made that choice ended up coming out ahead during the turbulent economy, when many people lost jobs, he adds.