Can a Sri Lanka, Pakistan-like economic crisis hit India? Raghuram Rajan answers

Ever since the Covid-19 pandemic, financial security has become a permanent concern. Recent headlines of economic distress from several countries including neighbours Pakistan and Sri Lanka is worrying many Indians. Opposition in India has on instances shot out warnings of a Lanka-like economic crisis. But is such a downturn really a possibility in India? Acclaimed economist and former Reserve Bank of India Governor Raghuram Rajan’s recent words would let Indians breathe a sigh of relief. 

The country does not face economic problems like Sri Lanka and Pakistan, Rajan has said. There are sufficient foreign exchange (forex) reserves. The external debts are low. He lauded the RBI for doing a ‘good job’.

"We have sufficient foreign exchange reserves. RBI has done a good job in increasing the reserves. We are not having problems like Sri Lanka and Pakistan. Our foreign debts are also less," Rajan told ANI. 

Why is India in a better economic position than Sri Lanka and Pakistan?

The deep financial troubles of Sri Lanka and Pakistan arise from very low forex reserves and mounting external debts. The Indian economy is resilient due to low foreign debt and high foreign exchange reserves, Rajan said. 

India’s forex stands at $571.56 billion for the week ended July 22, as per latest RBI data. The external debt was $620.7 billion at end-March 2022. Sri Lanka’s usable forex reserves dipped below $50 million. This forced it to suspend payments on foreign loans. 

Pakistan’s forex reserves stood at $8.57 billion for the week ended 22nd July 2022 after a $754 million slide, data from Pakistan central bank’s revealed.

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(With inputs from ANI)