India’s ‘dead’ economy contributing more to global growth than US: RBI Governor

 

 

THE Indian economy is “doing very well” and contributing more to global growth than the US, Reserve Bank Governor Sanjay Malhotra said on Wednesday, days after US President Donald Trump’s remark of India being a dead economy. The country is expected to grow 6.5 per cent, as against the International Monetary Fund’s (IMF’s) estimate of about 3 per cent global growth in 2025, Malhotra told reporters at central bank headquarters here. “We are contributing about 18 per cent, which is more than the US where the contribution is expected to be much less -- about 11 per cent or something. We are doing very well and we will continue to improve further,” Malhotra said, replying to a question on Trump’s recent comments. Malhotra said the aspirational growth rate for India should be more than 6.5 per cent, which the RBI is projecting for FY25, and added that the country has grown at a yearly average of 7.8 per cent in the past. Amid the trade policy negotiations, Trump had called India as a “dead economy” while expressing disappointment with New Delhi’s posturing to continue buying oil from Russia.

 

“I don’t care what India does with Russia. They can take their dead economies down together,” Trump had reportedly said. This statement and the ones following that were as sharp a critique, while having the potential to destabilise the India-US relationship, have also led to concerns over exact tariffs and penalties for buying Russian oil that await India from the Trump administration. Malhotra said the RBI does not expect any impact on inflation because of the tariff-related aspects, while Deputy Governor Poonam Gupta elaborated that there will not be any first order impact of the geopolitical issues on the domestic inflation. Even in the event of India being forced to shift away from Russian oil because of US concerns, there will not be any impact on domestic inflation, Malhotra said. He said this fiscal year, authorities will step in to ensure that the purchase prices of petroleum prices do not pinch the common man, hinting of a possible cut in duties if the oil becomes dearer. Amid uncertainties over global trade front Malhotra said that the central bank is taking all necessary steps to support economic growth.

 

“We will continue to do whatever is required to be done in such a scenario. Of course, trade negotiations are still continuing. We are hopeful that we will have an amicable solution,” he said during a post-monetary policy media interaction here. The RBI has taken a number of measures to support growth not only on monetary policy or liquidity side but on prudential regulation side as well steps have been taken, he said. On the Foreign Exchange Management Act side, he said, “We have a draft now which will be put up so as to ease doing businesses and ease international trade.” India has recently concluded a comprehensive trade pact with the UK, the UAE, and Australia.

 

Negotiations for similar pacts are going on with a number of countries, including the US, the European Union, Oman, and New Zealand. Malhotra also India has comfortable foreign exchange reserves, which can take care of 11 months of import. He said the RBI continues to monitor macroeconomic conditions on a policy-to-policy basis and take appropriate measures accordingly. “We will not be found wanting in whatever is required to provide the right balance of price stability and economic growth for the development of our country,” he said. On the issue of impact of rate cut on real economy, he said, it comes with a lag. With regard to bad loan situation, he said the NPA situation in the banking system is satisfactory with gross NPA at 2.2 per cent while net NPA is at 0.5-0.6 per cent.