Raghuram Rajan, Gita Gopinath see crisis risk if India focuses only on growth

This simply means India, a predominantly domestic consumption-driven economy, needs a much greater focus on macroeconomic stability than some of its Asian peers.

Published: 14th December 2018 12:45 PM  |   Last Updated: 14th December 2018 01:25 PM   |  A+A-

(Left to right) Former RBI governor Raghuram Rajan; International Monetary Fund Chief Economist Gita Gopinath. (Photos | AFP)

(Left to right) Former RBI governor Raghuram Rajan; International Monetary Fund Chief Economist Gita Gopinath. (Photos | AFP)

Bloomberg

India, one of the world’s fastest-growing major economies, risks being pushed into a crisis if the government sacrifices macro-economic stability for growth, according to economists including International Monetary Fund Chief Economist Gita Gopinath and the nation’s former central bank governor Raghuram Rajan.

To achieve macroeconomic stability, the nation needs to maintain low and stable inflation, ensure combined government budget deficit leaves room for private investment and keep a check on external-financing requirement to reduce vulnerabilities, they prescribed in a report, An Economic Strategy for India, released in New Delhi Friday.

Key Insights
This simply means India, a predominantly domestic consumption-driven economy, needs a much greater focus on macroeconomic stability than some of its Asian peers.

India relies on overseas money to fund investment and is vulnerable to a sudden reversal in sentiment.

A widening current-account deficit is seen as a key risk for the economy and one of the main reasons why

India became a target in a global sell-off of emerging markets this year.

The rupee has lost nearly 11 percent against the dollar this year, making it Asia’s worst-performing major currency

Some Highlights From the Report:
India’s aggregate fiscal deficit (federal plus states) is still close to 6.5 percent of GDP, higher than almost any in the G-20.

Investment rate has fallen sharply in recent years. 

External financing requirement (as measured by the current- account deficit) increased appreciably earlier this year, increasing vulnerability.

Get More
The 13 authors of the report include Pranjul Bhandari, chief India economist at HSBC Holdings Plc, Prachi Mishra, chief India economist at Goldman Sachs Group Inc., and Sajjid Chinoy, chief India economist at JPMorgan Chase and Co.
To see a synopsis of the report, click here

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  • Virna

    The more rajan explicitly explains the failings of Indian economy the worse it is made by the govt and politicians.
    6 months ago reply
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