RBI Governor Raghuram Rajan has spread out an obvious message that India is not witnessing any economic crisis and won’t advance IMF for funds for next five years.
Reserve Bank of India (RBI) Governor Raghuram Rajan has spread out an obvious message when he told a media channel that India is not witnessing any economic crisis and won’t advance the International Monetary Fund (IMF) for funds for next five years.
Relieving worries of India not being able to meet its monetary obligations, Rajan said, “India’s external debt to GDP is 22 percent and India has reserved of $280 billion, which is 15 percent of GDP.”
He said, in other words, India can pay three-fourth of its debt from its foreign exchange reserves.
At a debate on Global Economy on an international news channel Rajan said, “There is no way we are close to being a country is monetary or economic crisis. There’s not a possibility we will go to the IMF for money in the next five years.”
Other participants in the discussion were the Managing Director of IMF, Christine Lagarde, the Deputy Governor of People’s Bank of China, Gang Yi and Minister of Economy and Competitiveness of Spain, Luis de Guindos.
Reportedly, speaking on the sidelines of IMF’s meeting in Washington, Rajan said, “Out of total short-term external debt that we have to pay for is 10 percent of GDP. So, we have enough reserve to take care of that.”
India’s economic growth slumped to a decade low of 5 percent in 2012-13 fiscal, whereas its current account deficit (CAD) ascended to an all time high of 4.8 percent of GDP in the same fiscal year.
The Indian currency, which declined sharply after the US Fed announcement of stimulus tapering in May, had pushed up price of imports, primarily crude oil consequently contributing to inflation.
RBI has taken a chain of measures in the past months to reinforce rupee and sponsor growth.
Rajan said, “We bought over $60 billion gold last year, which accounts for three-fourth of the country’s current account deficit. If the push comes to shove, we can pay the world in gold.”
The RBI governor said while India’s economy is lethargic, the country’s foreign exchange reserves are big enough.
He said, “We need to return with growth now. But we’re still doing better than major number of world economies.”
India’s Finance Minister P. Chidambaram, who is also in Washington, has by now declined IMF’s growth projection of 3.75 percent for India as negative.
Both Chidambaram and Rajan are in Washington to take part in the Fund-Bank meetings.
During the debate, India’s top banker also cautioned that ‘easy money’ created by the US Fed’s stimulus policies is huge part of India’s problem.