The paper, a critical review of the performance of the Indian economy, finds that notwithstanding the remarkable resilience o(the economy as a result of stabilisation measures the growth has faltered since the mid nineties. The myopic behaviour of agents [households, firms, commercial banks, the central bank (monetary authority) and the government) force 'sub-optimal' outcomes. Given the institutional constraints, an imprudent fiscal adjustment coupled with aggressive monetary measures in the absence of critical structural reforms contracted the economy. This should be viewed against the pervading uncertainty due to the lack of credibility of the reform programme, apart from the instability usually associated with a regime shift in the transition and bouts of exogenous shocks. Therefore, given the structural transformation and financial integration, monetary policy must ensure overall financial stability not merely price stability. Conjointly, fiscal adjustment must aim at altering the composition of fiscal expenditure more in favour of higher public investment in economic and social infrastructure. In addition to other structural reforms, micro institutional and legal reforms by strengthening either the existing institutions or creating new ones are of paramount importance to nudge agents towards sustainable long-term growth. On many counts India is a good case for developing countries of 'how not to structure structural adjustment'.