RBI DG: Macro factors strong, no pressure on balance of payments

NEW DELHI: RBI deputy governor Poonam Gupta Friday said that India has strong macroeconomic fundamentals, which can help it sustain 7.5% growth with low inflation, and added that she was not seeing a major impact on the balance of payments situation due to the West Asia conflict.

At a conference organised by the Isaac Centre for Public Policy at Ashoka University, Gupta said India has inherent and structural strengths – solid remittances and that move in one direction, net services exports, which are doing very well and FDI. While noting that there has been an increase in portfolio flows, she suggested that the situation would change due to structural factors.

Asked about the impact of war on remittances, the RBI deputy governor argued that with tension easing, migrants will return to West Asia and reconstruction along with “revenge spending” will help going forward.

Gupta was optimistic on the economy, saying that growth had surprised (higher than original projection) on the positive side for the last three years, with around 7.5% and inflation remaining under 4%. Given that the situation remained dynamic, RBI will assess growth and inflation projections ahead of next month’s monetary policy committee meeting, she said.

In a detailed presentation on the monetary policy framework, Gupta said monetary policy and the fiscal policy were working towards macroeconomic stability. She added that the monetary policy framework, with inflation target of 4%, which can move in the 2-6% band, had served India well.


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