BANGALORE: The Reserve Bank of India (RBI) has saved India from being fully exposed to the current global economic crisis by preventing full current account convertability, said columnist S Gurumurthy on Tuesday.
Delivering a talk at the Federation of Karnataka Chamber of Commerce and Industry (FKCCI), he pointed that the committee constituted by the RBI - following directions from Prime Minister Manmohan Singh to develop a roadmap to current account convertability, had stipulated conditions that were very difficult to meet.
“By specifying that current account convertability should be enabled only if the fiscal deficit comes down to less than 3 per cent, inflation to less than 5 per cent, and when surplus export growth is witnessed - conditions which no political party can achieve, the RBI has saved us from being completely exposed to the crisis.
Gurumurthy criticised the mixed signals that the PM had been giving out on the integration with world economy.
“In 2006, the PM said that the Indian economy was irreversibly integrated with the world economy. In September this year, he said that we have to insulate our economy from the financial crisis,” he said.
On the financial crisis in America, Gurumurthy said that American families will be hit further because of the high level of investment in the stock market. “In 1980, only 5.6 per cent of American families were in the stock market, by 1990, 25 per cent had shifted to stock markets, and by 2001, 55 per cent of American families had invested in the stock market,” he said. On the other hand, he said, family savings had declined over the years: family savings constituted 80 per cent of all savings in 1981, while, in 2005, family savings went into negative territory of 12 per cent. On lessons learnt from the crisis, Gurumurthy said that India cannot continue ‘our allegiance to anglo-saxon intellectualism’.
“We have to take into account that India is a savings-oriented country,” he said.