The RBI Governor, Raghuram Rajan, has said that the country is in a much much better position now than it was a year ago and allayed foreign investors' fears that they will be kept out of the India growth story.

Rajan said that the Government is committed to control the fiscal deficit. The current account deficit has been brought under control and the foreign exchange reserves are significantly higher over last year, he added.

“One of the big concerns that investors have, who are coming to India, is that are you going to take away the benefits of India growth from us by inflating (the economy) and thereby depreciating the rupee?

“The answer is no…we have no intent of doing that. We want to control inflation and bring it closer to inflation in other (advanced) countries so that the rupee is not seen on a continuously weakening path,” Rajan added.

Rajan said that it was perceived in mid-2013 that the Indian economy was in a crisis when there was no real big problem.

“Today that perception is also dismissed. The most important thing is that we have a stable government and political stability to my mind is worth a tremendous amount as far as the external situation goes,” he added.

Interest rate cycle

Commenting on the risks facing the Indian economy, Rajan said that nobody in the world knows what will happen when the interest rate cycle changes in the advanced economies, especially the US.

The US has deliberately kept its interest rates low to reinvigorate its economy. As a consequence, a lot of foreign investors have poured money into India and other emerging market economies because of the interest rate differential.

“When the perception of interest rate differential changes and money starts flowing back, we will find out then who is swimming naked. But for sure, I don’t anticipate that it will be us,” he remarked.

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