Will India face Sri Lanka, Pakistan-like economic crisis? Raghuram Rajan's reply

Updated on Jul 30, 2022 08:02 PM IST

Raghuram Rajan said India has sufficient foreign exchange reserves. The RBI has done a good job in increasing the reserves. 

Former Reserve Bank of India (RBI) governor Raghuram Rajan.(Reuters file)
Former Reserve Bank of India (RBI) governor Raghuram Rajan.(Reuters file)
By | Edited by Aniruddha Dhar, New Delhi

Former Reserve Bank of India (RBI) governor Raghuram Rajan on Saturday said the central bank has done a good job in increasing the foreign exchange reserves and the country would not face the economic problems like Sri Lanka and Pakistan.

“We have sufficient foreign exchange reserves. The RBI has done a good job in increasing the reserves. We are not having problems like Sri Lanka and Pakistan. Our foreign debts are also less,” news agency ANI quoted Rajan as saying.

Sri Lanka’s inflation surged to 60.8 per cent in July, up from 54.6 per cent in June, the crisis-hit country's statistics department said on Saturday, as food and fuel remained scarce amid depleted foreign exchange reserves.

The year-on-year inflation based on the Colombo Consumer Price Index was 60.8 per cent in July, the department of census and statistics said in a statement. In June it was 54.6 per cent.

The year-on-year food inflation in July is 90.9 up from 80.1 per cent in June. The country's central bank has said inflation may peak at 75 per cent.

Sri Lankans have faced a shortage of essentials amid the ongoing economic meltdown, the worst since 1948.

In Pakistan, the ongoing political unrest is increasing economic uncertainty, causing the rupee to depreciate, and impacting the cost of production. Pakistan's economic outlook remained uncertain and blurry while inflation would stick around the current level of 21 per cent in the short term, said the ministry of finance on Thursday, amid the government's failure to stem rupee depreciation that was causing price hike. In its monthly economic outlook for July, the economic advisory wing underlined that the inflationary and external sector risks were building macroeconomic imbalances in the economy.

Rajan said at present, there is inflation all over the world. The RBI is increasing interest rates which will help in reducing inflation. Most inflation is in food and fuel. "As we can see food inflation is coming down in the world and will decrease in India also,” the former RBI governor said.

According to the latest RBI data, India's foreign exchange (forex) reserves stood at $571.56 billion for the week ended July 22.

During the week ended July 22, the forex reserves dropped by $1.152 billion.

According to the Reserve Bank of India's weekly statistical supplement, the forex reserves declined during the week ended July 22 only because of the drop in foreign currency assets. All other components of the forex reserves registered gains during the week.

India's foreign currency assets, which are the biggest component of the forex reserves, fell by $1.426 billion to $510.136 billion during the week ended July 22. The foreign currency assets had declined by $6.527 billion during the week ended July 15 and by $6.656 billion in the previous week.

(With inputs from ANI, Reuters, PTI)

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