India's recovery from the global financial crisis is fragile though the economic fundamentals are strong, Reserve Bank of India (RBI) Governor D Subbarao said in Hyderabad on Friday.
The country's exports have declined for 12 months in a row while the inflationary pressure is building up, Subbarao observed while making a presentation on India and the global financial crisis at the Indian School of Business (ISB) in Hyderabad.
The kharif output is estimated to decline by 18 per cent, he added.
That apart, there had been deceleration in non-food credit in the current financial year, which indicated that recovery was fragile, the RBI chief said.
Subbarao, however, said India's recovery would be "swift and sharp" once the global recovery started.
The rural sector helped India in arresting the fall in consumption during the period of the financial crisis. The National Rural Employment Guarantee Programme and the farm debt waiver had ensured that there was money in the rural households, he said.
According to Subbarao, it is necessary for the government to return to fiscal consolidation and support drivers of growth like private investment and consumption.
"There are no benign options. The challenge is to minimise the pain of adjustment over a period of time."
The challenges before the country are ensuring monetary and fiscal stimuli work, returning to fiscal consolidation, supporting drivers of growth and managing policy in a globalising world, the governor said.