According to the former governor of RBI and the man who is credited with formulating policies that absorbed the shock emanating from global financial crisis, at present confidence among the industry and investors needs to be improved but that does not mean India is in 2008 crisis like situation
Mumbai: Dismissing fears of stagflation, YV Reddy, former governor of the Reserve Bank of India (RBI) said India is still one of the fastest growing large economies, reports PTI.
"Where is the issue of stagflation? Though inflation is a concern but that does not mean that we are de-growing. We are still one of the fastest growing large economies," Reddy, who is credited with formulating policies that absorbed the shock emanating from 2008 global financial crisis, told PTI.
"There are issues facing the economy..." Reddy said, adding that some confidence boosting measures are needed.
"Yes, confidence among the industry and investors have to be improved. But that does not mean we are in 2008 crisis like situation," the former RBI governor, who is now the emeritus professor at the Central University of Hyderabad, said.
Reddy was in town for the launch a book containing the unpublished essays of the late RBI governor IG Patel, titled, "Of Economics, Policy and Development: An Intellectual Journey by IG Patel.
The book, launched by Governor D Subbarao at the RBI headquarters this evening, was edited by Reddy along with ex-RBI research director Deena Khatkhate and is published by the Oxford University Press.
Indraprasad Gordhanbhai Patel (November 11, 1924-July 17, 2005) was the 14th RBI governor and served a five-year tenure from December 1977 to 1982.
While 2011-12 GDP growth hit a nine-year low of 6.5%, a slew of financial institutions have significantly downgraded their growth forecasts for this fiscal as well, saying the Indian economy is facing a stagflation-like situation.
Speaking on the relevance of Patel's thinking Monday, Reddy said, the late governor was closely involved in the policymaking for nearly five decades and reading about him can help the current policymakers as his credo was pragmatism in all policy decisions.
When asked if the four-year-old crisis facing the global economy was a failure of economics or its practice by a greedy few, Reddy said the still lingering crisis arose because certain people began to think only in one particular way, which became the over-riding principle of economics.
When asked about his views on the RBI way is handling the crisis arising from the steep fall in the rupee, Reddy said, "we should make a distinction between countercyclical measures and monetary policies. The RBI has been for long following a policy of moderating volatility in the currency market."
As a prescription for the Eurozone crisis, he said what is needed is a combination of fiscal and financial measures, apart from a political will to resolve the crisis.
"What is happening in the Eurozone is due to the absence of combined effort at the fiscal, financial and political fronts. Therefore, what is needed are some institutional changes. These are very important for the European economies to come out of the crisis."
Going by the way things are moving in the Eurozone, the region may not even come out of the present crisis before 2014, Reddy said.
On what is the best tool to control inflation, the former RBI governor said, "inflation is not simply a monetary phenomenon, it also calls for prudential measures."