Challenging time ahead for India, global economy: Kaushik Basu

Cautioning that tough times are ahead for India as well as the global economy, World Bank chief economist Kaushik Basu has expressed concerns on the staggering rupee and said that India should use foreign exchange reserves to help stabilise the rupee, which has been continuously hammering market sentiments in the country. Recently, domestic depreciated to a record low of over 64 per dollar on account of persistent demand for the US currency from banks and importers coupled with capital outflows from foreign funds. 

Kaushik Basu said that next one and half year is going to be very difficult for global economy and India needs to do more on facilitating export so as to tighten up on the burgeoning current account deficit (CAD) problem that has eclipsed the growth of economy. The country’s CAD widened to a record high of 4.8 percent of GDP in the previous fiscal on account of high gold imports and crude oil prices. Regarding, the possibility of India witnessing a repeat of the 1991 balance of payments crisis, he said that current situation was healthier than that of 1991 and there is no question of going back to1991 crisis. By adding further, Basu said that India has enough foreign exchange reserves, therefore the country does not need to seek a line of credit from the International Monetary Fund (IMF) to help fix the economy.