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Today’s economic crisis cannot be compared with what the country had undergone in 1991, according to Dr D. Subbarao, Governor, Reserve Bank of India.
Delivering the K Obayya Memorial Lecture here on Thursday evening, Dr Subbarao said 1991 crisis was caused by the twin deficits of fiscal deficit and current account deficit.
“Today’s fiscal deficit is almost on the same level as 1991 while current account deficit is higher than that. But it is highly improbable that we have 1991 problem,’’ he said.
India’s economy was different today from what it was in 1991 with a $2 trillion worth, resilient and robust financial markets, he added.
However, this was not to say that India was free from problems. “There are problems at the macro-economic level and India’s growth story was not inevitable,’’ Dr Subbarao said.
Referring to the general criticism that RBI’s monetary tightening in the last two years did not tame inflation but hit the economic growth and demands for a more liberal policy, the RBI Governor said it was not possible to control inflation without sacrificing growth.
“`The sacrifice of growth now is a small price to secure growth in the medium term,’’ he said.
On Monday, the RBI is slated to announce its stance on key rates in the mid-quarter policy review. There has been a demand from industry and banks that the interest rates should be reduced to improve liquidity and spur growth.
Referring to corporate concerns, Dr Subbarao said: “I have lot of regards and sympathy for them. But I am also sensitive to hundreds of millions whose voice is not heard in English newspapers.’’
Mr K. Obayya was a former civil servant of AP cadre.
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