Business: India has handled itself amid global uncertainty. Reserve Bank of India Governor Sanjay Malhotra made this comment. He said fiscal discipline and strong coordination between monetary and government policies have played a key role in India keeping inflation under control and maintaining economic growth even in difficult global circumstances. Malhotra said this in a conversation with Krishna Srinivasan, Director of Asia and Pacific Department, during the annual meetings of the International Monetary Fund (IMF).
Synergy helped maintain India’s stability
He said that it has been a big challenge for emerging markets to control inflation amid rising tariffs and fluctuations in commodity prices. In such a situation, coordination between the central bank and fiscal authorities has helped India maintain stability.
Estimated to reduce fiscal deficit to 4.4 percent of GDP
Malhotra said that the fiscal generosity adopted by the Central Government and State Governments has also helped in this. The fiscal deficit is now at a very manageable level, with the central government now projected to reduce it to 4.4 per cent of GDP. The total debt of both state and central governments is the lowest among large debt economies. I think Germany is the only one with a lower public debt level.
Dollar fell by 10 percent this year
On managing exchange rate volatility, Malhotra said that although emerging market currencies have been quite volatile against the dollar, India’s approach has been to ensure systematic movement of the rupee rather than targeting any specific level.
Malhotra said that see, this year the dollar has fallen by about 10 percent from its peak and now it is moving in a limited range only. On the other hand, the Indian rupee has not appreciated as much against the dollar as most other currencies have since independence this year. He attributed this to higher tariffs and some capital outflow. Also said that the performance of Indian rupee and equities has been strong over time.
Rupee is performing better than others
The RBI Governor said that before the Liberation Day, i.e. from 2024, the Indian stock market and the Indian Rupee are actually performing better than others. So, in a way, it is also an improvement. He stressed that India’s foreign exchange market is deep and strong and the central bank’s focus is on maintaining stability.
