World Economy

India Says Capable of Higher Growth

India Says Capable of Higher GrowthIndia Says Capable of Higher Growth

Reserve Bank of India Governor Raghuram Rajan on Monday said that economic growth is still below the level what the country is capable of although compared to other countries, India is in a good position.

Addressing an annual banking conference of Federation of Indian Chambers of Commerce and Industry in association with Indian Banks Association in Mumbai, Rajan said, “While I agree that economic growth is still below the level what the country is capable of, relative to other countries, India is in a good position”, ANI reported.

On continued volatility of the market , Rajan said, “While I don’t want to opine on future directions of markets, I would say, relative to other countries India is in a good position with strengthening growth, low current account deficit, narrowing fiscal deficit, moderating inflation and low short term foreign currency liability.”

“Bandhan Bank is first new bank in over ten years. This entire conference is focused on technology in banking which will bring about a revolution in how the industry accesses, transacts and supports the customer. Macroeconomic factors are under control, we have $380 billion in forex reserves. It’s very important to reassure the markets that we have the macro economic problems under control,” he said.

 Controlling Inflation

Rajan also said the priority of the central bank is to bring down inflation. “Short term priority of RBI is to bring down inflation. The best way for a central bank to ensure sustainable growth is to keep demand close to supply so that inflation is moderate”.

Rajan pointed that although consumer inflation has fallen sharply, inflation expectations among the public has gone up.

Quoting from RBI’s August 4 policy document, he reiterated the bank’s resolve to keep inflation under control and help boost growth with a low interest rate regime.

“Significant uncertainty will be resolved in the coming months, including the likely persistence of recent inflationary pressures, the full monsoon out-turn, as well as possible Federal Reserve actions. As the Reserve Bank awaits greater transmission of its front-loaded past actions, it will monitor developments for emerging room for more accommodation”, he said.

Stating that low current account deficit, fiscal deficit discipline, moderate inflation, low short-term foreign currency liabilities, and very sizeable base of forex reserves make our economy better-placed relative to many others, Rajan said, “We will have no hesitation in using our reserves when appropriate to reduce volatility in the rupee.”

On yuan devaluation, Rajan said the Chinese move is the result of the extraordinary monetary policies that have  been going on across the world.

He added that the extent of depreciation of the yen and the euro in recent months suggest the turmoil in the currency markets that has been in the making. China is just the last step in that and comes from Asian countries.