The Indian economy is in good shape as the country’s GDP growth rate and foreign exchange reserve are high, former RBI governor Bimal Jalan said today. In spite of economic uncertainties triggered by the Russia-Ukraine war that is also impacting the global supply chain, Jalan said it was not going to affect India’s economic performance.
“India’s current macroeconomic situation is quite positive in the sense that the rate of growth is high. India’s foreign exchange reserve is also very high,” Jalan said, “India (Indian economy) is in good shape.”
Asia’s third-largest economy is projected to grow 8.9% in 2021-22, according to recent government data. The Reserve Bank of India (RBI) has pegged the economic growth rate for 2022-23 at 7.8%.
The former RBI governor, however, stressed that unemployment is high, which is a matter of concern.
As the Russia-Ukraine crisis is concerned, Jalan said obviously, it will have an impact all over the world.
“But so far India is concerned, its relationship with Russia was quite good but exports-imports was not very much,” he said, adding that it was less than 2%.
While observing that development in Ukraine is a matter of concern, Jalan said it is not going to affect India’s economic performance.
Russia started its military offensive against Ukraine on 24 February. Western nations, including the US, have imposed major economic and various other sanctions on Russia following the offensive.
Jalan noted that high inflation was a problem. Retail inflation hit an eight-month high of 6.07% in February, remaining above the RBI’s comfort level for the second month in a row, while wholesale price-based inflation soared to 13.11 per cent on account of the hardening of crude oil and non-food item prices.
Asked if India must use its foreign reserves for infrastructure as proposed by Union minister Nitin Gadkari, he said as far as infrastructure development was concerned, it had to be done in rupees.
“Foreign exchange reserves have to be used for doing something in foreign exchange…If there is a shortage of money, then foreign exchange reserves can also be liquified,” Jalan suggested.
Regarding high petrol and diesel prices, Jalan said the government had already cut some taxes on petrol and diesel.
“And some more taxes if they can reduce, (then) that is desirable,” the former RBI governor said.
Rates of petrol and diesel are rising and vary from state to state depending upon the incidence of local taxation.