RBI chief calls economic view 'disturbing'

NEW DELHI Sun Apr 15, 2012 8:11am IST

The Reserve Bank of India (RBI) logo is pictured outside its head office in Mumbai January 25, 2011. REUTERS/Stringer/Files

The Reserve Bank of India (RBI) logo is pictured outside its head office in Mumbai January 25, 2011.

Credit: Reuters/Stringer/Files

Related Topics

Priyanka Gandhi Vadra, daughter of Congress party chief Sonia Gandhi, adjusts her flower garlands as she campaigns for her mother during an election meeting at Rae Bareli in Uttar Pradesh April 22, 2014. REUTERS/Pawan Kumar

Election 2014

More than 814 million people — a number larger than the population of Europe — are eligible to vote in the world’s biggest democratic exercise.  Full Coverage 

NEW DELHI (Reuters) - India's deficits and short-term debt levels are "disturbing," but it is not facing a repeat of a 1991 balance of payments crisis, Reserve Bank of India chief Duvvuri Subbarao said on Saturday.

Dependent on imported oil which it then subsidises, India is exposed to external shocks such as high crude prices and has seen its fiscal and current deficits blow out in recent months, triggering some economists to warn of a looming crisis.

In 1991, India came close to defaulting on foreign debt payments when the first Gulf War drove oil prices up, leading to a depletion of foreign reserves and a currency crash.

Subbarao said the economy was far more resilient now and that the probability of an "implosion" was low.

India's current account deficit for last year is estimated to be higher than in 1991, and short term debt makes up twice as much of total debt as it did in 1991, the RBI governor said.

"That is quite a disturbing picture," he said. "Nevertheless, I would still argue that in 1991 an implosion was imminent, in 2012, an implosion in not imminent."

"There are serious concerns about the macroeconomy, about our policy environment, and about our governance," Subbarao said at a panel discussion attended by Prime Minister Manmohan Singh.

"We should prove to the world that the current downturn is just a short-term phenomenon and that the long-term growth drivers will come back into play," Subbarao said.

Singh remained mostly quiet during the discussion, in which influential economist Raghuram G Rajan called on the government to quickly reduce subsidies on domestic fuel to restore confidence in the economy.

Singh's weak coalition government has vowed to cut the subsidy bill to bring the fiscal deficit down from 5.9 percent last year, but needs to win support from populist allies and opposition parties already fuming at high inflation.

The prime minister accepted there were economic difficulties, but said they could be resolved with determination.

(Reporting By Frank Jack Daniel; Editing by Eric Walsh)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Market Eye


Asian Markets

Asian Markets

Asian stocks flat after China PMI meets expectations  Full Article 

Chinese Economy

Chinese Economy

Factory activity shrinks for 4th month; pace of decline slows   Full Article 

International Gold

International Gold

Gold hovers near 2-1/2 month lows on firm equities, fund outflows  Full Article 

GM Lawsuit

GM Lawsuit

GM seeks U.S. court protection against ignition lawsuits  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage