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The carnage in global stock markets, triggered by troubles brewing in the Chinese economy and crash in commodity prices, has yet again raised concerns on a prolonged global slowdown. This has had its ripple effects in India too. The Sensex, India’s benchmark equity index, opened 1,000 points down on Monday, while the Nifty posted its biggest intra-day fall in almost six years. (The Sensex closed down 1,624.51 or 5.94% at 25,741.56, the biggest ever fall in absolute terms.) The Indian rupee plunged further to touch an intra-day low of 66.71 against the dollar triggered by a panic sell-off by foreign institutional investors.

But a slowing world, experts believe, also presents the biggest opportunity for India to emerge stronger and consolidate its position among peers, indeed only if the country manages to set its house in order. A slowing China, weak recovery in the US and troubles in Europe shift the global focus to Asia and India has much better chances to emerge as the winner among its peers. The country has all base conditions right for a growth rebound with international crude oil-prices at six-year lows, cheaper commodity prices, strong economic fundamentals and much stronger forex reserves kitty (over $354 billion).

“There is no doubt that the current slowdown in global environment is a big opportunity for India if it sets its house in order,” said D K Joshi, chief economist at rating agency Crisil, the Indian subsidiary of global major Standard and Poor’s. Speaking at an event on Monday, RBI governor, Raghuram Rajan too said the India is in a better position compared to other markets but the country will have to strengthen its domestic market by increasing production. The country is still below the level of its economic potential growth than what it is capable of, Rajan said.

Here are a few areas, where the Narendra Modi government should act or should have already acted quickly not to miss the boat:

One, the government should step up public spending in infrastructure in a big way. So far, there is no revival in private sector investment and the bank credit to large industries. The government spending has picked up in the recent months but, this needs to be increased further to provide the much needed impetus to the economy. The core sector recovery has remained muted and the government must forget its obsession on fiscal deficit and initiate a major spending push to develop public infrastructure, since this is key to grab India’s opportunity in the world.

Second, investors’ confidence has surely taken a hit in the backdrop of slow progress of key reforms steps as promised by the Modi government earlier. Big-bang reforms are key to regain this lost investor faith, especially those pertaining to Goods and Services Tax, land acquisition and labour laws. Industry is becoming impatient about the inability of the Modi government to walk the talk on reforms.

Global investors are already suspicious on the government’s ability to push ahead the reform agenda. In July, Moody’s Investors Services warned of disappointment creeping in on the slow paced reforms undertaken by the Modi government. After the initial progress made on small reform steps (insurance and coal bills), high-priority items such as land acquisition reforms and bringing clarity on tax front still remain in the to-do list. The government must get its act together on the reform front.

Third, price stability is key in the long term for any economy aspiring to be stronger. The RBI should be given a free-hand in continuing with its inflation fight. Inflation is down but not dead yet. There is pressure mounting on the central bank to cut rates form the government (LINK) and support the falling growth, but even a rate cut from the RBI wouldn’t help much as long as banks do not pass on the rate cut benefits to the end borrower. But it is high stressed assets on the books of banks limits their ability to cut rates, not absence of RBI rate signals.

As the RBI governor pointed out, inflation expectations of public still remain high. As Firstpost has noted before, the fall in retail inflation rates has been encouraging but, a faulty monsoon and the fading off base effect increases the upside risks to inflation going ahead. The resurgence of inflation can be problematic to the overall economy in the long-term.

Fourth, it is highly critical to clean up the bank balance sheets filled with bad loans to resume credit expansion in the economy. The Modi government has come up a with a plan, called Indradhanush, to revive the operations of state-run banks but this plan doesn’t address the issue of tackling stressed assets in the banking system. Banks should be aided by the government for recovery of bad debt from large corporate defaulters and, more importantly, shouldn’t be forced to lend further to high risk sectors on government directives. Unless the bad loan problem is solved, it is difficult that banks will be a position to resume lending to aid economic recovery.

Fifth, the government should have clearer idea about the disinvestment process. Against a target of Rs 69,500 crore for the fiscal year 2016, the government has so far managed raise only about Rs 3,155 crore through the disinvestment process. Today, the government expects to raise close to Rs 10,000 crore. As Firstpost noted earlier, the government should have aggressively gone ahead with the disinvestment plan quite early, when the markets were ripe and investor appetite was adequate. One has to wait and see whether the market will have appetite for the remaining issues. The government needs to be more aggressive in the disinvestment process.

The bottomline is this: If the government acts with urgency and push ahead the reform promise, a slowing world is a big opportunity for India to consolidate its position and emerging stronger out of the crisis.