Reserve Bank of India (RBI) governor D Subbarao on Thursday sent out a clear message - that India’s economic recovery would be swift and sharp.
Reserve Bank of India (RBI) governor D Subbarao on Thursday sent out a clear message - that India’s economic recovery would be swift and sharp. At the same time, he pointed out that “India can’t start recovering unless there’s some level of global stability.”
According to him, India is more globalised and integrated “than we tend to believe”. He also ruled out any fears of sustained deflation in India.
Subbarao was speaking at a session during the CII National Conference in New Delhi on the issue of the economic meltdown. The fiscal 2009-10 would be more challenging than the current year, said the RBI governor. That’s mainly because fresh investments are likely to be deferred for some time to come, he said.
To a question on whether a third stimulus package was being considered, Subbarao said, “give the two stimulus packages (that have already been announced) some time to act”.
The RBI chief admitted that the Indian economy had been hit by the financial channel, real channel and confidence channel. He also said that “contrary to our expectations, all our markets have been impacted by the economic crisis.”
He listed out the negatives — economic activity had slowed down, exports had declined, service sector was decelerating, investment demand was down, corporate margins had been dented. “Therefore, growth moderation was deeper than we earlier thought.”
To balance out the negatives, Subbarao counted the positives too — inflation was declining, crude prices were lower, current account deficit would be modest.
To a question on the bleak exports scenario, Subbarao said, “There would be a permanent solution only when export demand revives.”
On the issue of regulating private banks, he pointed out that, “Our private sector and foreign banks are prudently regulated.”
While he didn’t indicate a timeframe by when the Indian economy would recover, the RBI governor stated that India’s growth fundamentals were intact.
“I’m not clear when global recovery would start, but India’s recovery would be swift and sharp.” Meanwhile, painful adjustments have to be made, he stressed.
On whether the debt management office should be separate from financial regulation, Subbarao replied, “the debate on this should go on till we take a call on the matter.”
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