Economy facing difficulties, admit PM, RBI

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SME Times News Bureau | 16 Apr, 2012
Prime Minister Manmohan Singh and RBI Governor D Subbarao have said the Indian economy was facing "difficulties" but expressed hope that the challenges will be overcome.

"There are difficulties. Life will not be worth living if there are no difficulties. I am confident with great determination, we will overcome (these)," Dr. Singh said after the discussion during which RBI Governor D Subbarao, professor of University of Chicago Raghuram G Rajan and Business Standard chairman T N Ninan participated.

Speaking on the occasion, Subbarao described the current downturn a short-term phenomenon. He said Indian economy is mature enough to absorb 'shocks' and the country's growth story is intact.

He said although the key indicators like fiscal deficit and current account deficit were at the same level as in 1991 when the country had to take drastic actions to deal with the problem, but "implosion was not imminent in 2012".

The RBI chief said, "India's growth story is intact ... current downturn is short-term phenomenon".

Pointing out that the fiscal deficit was high, he said, "we must also acknowledge that all (problems) are structural. We had a crisis. We gave fiscal stimulus. Growth had gone down, therefore revenues went down. We had to borrow more."

The government proposes to bring down the fiscal deficit to 5.1 per cent of the Gross Domestic Product (GDP) in the current fiscal from 5.9 per cent a year ago.

As regards the current account deficit, he said, it was high on account of various international and domestic factors including high import of gold.

"I am not saying that we have insulated ourselves from all crisis. I am not saying that economy is in the pink of health or on a roll. I am not saying that the macro economic situation is not a cause of concern. On the contrary there are serious concerns about the macro economy, far from being complacent," said Subbarao.