Indian economy better than many others, says RBI governor
India’s macroeconomic factors are “under control” and the country’s economy is “better” than many others, Reserve Bank of India Governor Raghuram Rajan said on Monday. “Growth is stronger, the current account deficit has narrowed significantly, the fiscal deficit is on a consolidation path, and inflation has halved,” Rajan said at an Indian Bank Association summit in Mumbai. The statement comes amid continuous fall in the financial market across the globe and its impact on the rupee value. Seeking to allay investors’ concern due to falling stock exchange indices in the past four days, the RBI chief said that the country has the buffer of $380 billion forex reserve which can be used in case of emergency. Citing improvement in various microeconomic factors, Rajan said that the current account deficit has narrowed significantly, the fiscal deficit is on a consolidation path, and inflation has halved. However, he said, “The economic growth is still below levels that the country is capable of.” “While consumer price inflation has moderated, inflation expectations amongst the public are still high, creating a gap between the real rates that savers expect and the rates corporations think they pay,” he said, adding that the reduction in interest rates must be a natural consequence to sustained low inflation. “Rate cuts should not be seen as goodies that the RBI gives out stingily after much public pleading. Instead, what is important is sustained low inflation, something the Prime Minister emphasized in his Independence Day speech, and rate cuts are a natural consequence that the RBI has no hesitancy in delivering,” Rajan said. He said that despite positive outlook of the country’s economy, stressed assets in the financial system continue to be high and this is holding back the growth. In its last monetary policy review on August 4, the central bank had kept the repo rate unchanged at 7.25% but hinted that the rates can come down if the inflation remains under control. The next bi-monthly policy review will be announced on September 29.
August 24, 2015 | 3:31pm IST.
to success.