New Delhi, June 16 -- The past several weeks have been dominated by concerns about an energy shock, a weakening rupee, the possibility of a truant monsoon and latent inflationary pressures as a result of these dislocations.

The nationwide debate is rightly focused on what combination of fiscal, monetary and exchange rate policy should be crafted to simultaneously maintain an internal balance as well as external balance for the Indian economy. The general thumb-rule is that fiscal and/or monetary policy should be activated for the former while a flexible exchange rate is the principal tool for the latter.

However, the immediate focus on macro stability should not take attention away from other important challenges. One set of interconnec...