Expressing confidence over Indian economic growth recovery, the Reserve Bank of India (RBI) governor Raghuram Rajan said that India's slowing economy and its massive current account and fiscal deficits are not structural problems and can be fixed with modest reforms. The RBI governor expects that Indian economy will grow between 5 and 5.5 percent in the current fiscal.
By adding further, Rajan said that present slowdown in the economy was paradoxically the effect of substantial fiscal and monetary stimulus that were taken by the policymakers after 2008 financial crisis to recover the economic growth. The resulting economic growth led to high inflation in the country, because the world did not slide into a second Great Depression, as was originally feared. Thereby, monetary policy has been remained tight, with high interest rates, contributing to slowing investment and consumption, he added.
At present, domestic economy is struggling with slowdown and its growth slowed down to four year low at 4.4 percent in Q1 FY14. Further, country’s current account deficit (CAD) widened to a record high of 4.8 percent of GDP in the FY14 on account high gold imports and crude oil prices. High CAD also remained main cause for rupee depreciation, which recently deflated to a record low of over 68.50 against the US dollar.
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