Allaying apprehensions over an impending economic crisis, RBI Governor D Subbarao on Monday said that India’s growth rate was still credible.
Addressing a seminar organised by the State Planning Board on ‘India in a globalising world - some policy dilemmas’, he said the long-term growth can be achieved if the economic reforms are implemented with vigour. “The economy is more vulnerable to external crisis now. Unlike in 2008-09, the oil prices are up now and the external sector is also tight leaving little room for policy options,’’ he said.
Subbarao said unlike several other emerging economies, inflation hasn’t come down in the country because of the rapid depreciation of the rupee. The RBI Governor said that the RBI was forced to up the interest rates to control inflation though it would affect growth rate.
Referring to the criticisms on increase in interest rates, he said: “One of the criticisms raised was that we could not control inflation and that after we raised the interest rates the growth rate has slowed down. However this is a short-term phenomena. Some sacrifice in growth is inevitable to control inflation. Tight monetary policies will have short-term effects on production and thereby growth rate, but it will help raise the growth rate and secure the economy in the long run,’’ he said.
He said that the country was much stronger at present than in the year 1991. ‘’The country had just $ 1 billion foreign exchange reserves in 1991 whereas the figure is $ 28 billion now. Moreover, the service sector accounts to 65 percent which would help in reviving the growth rate,’’ he said.
Kerala Chief Minister Oommen Chandy inaugurated the seminar.