Mumbai: India’s money, bond and currency markets have been stable and may be immune to the global credit crisis, Reserve Bank of India (RBI) governor Yaga Venugopal Reddy said in New York on Tuesday.
Asia’s third largest economy, with its “modest” current account deficit, plays a stabilizing role in the international financial sector and hasn’t contributed to global economic imbalances, Reddy said. RBI sent the copy of his speech on Wednesday by email.
“The current turbulence in financial markets and institutions has raised enquiries about a possible contagion,” Reddy said. India’s “money, government securities and foreign exchange markets have been stable and, in our view, may not be vulnerable to direct and first-round effects.”
Credit markets seized up after the collapse of the US subprime mortgage market, dragging the world’s biggest economy to the brink of a recession.
The Organization for Economic Cooperation and Development (OECD) on Tuesday raised its estimate of writedowns by global financial firms to as much as $422 billion (Rs16.9 trillion) and said a recovery would take at least a year. The squeeze has raised concern the crisis is deepening and spreading to othermarkets. ICICI Bank Ltd, India’s second largest bank, reported last month $264 million in losses tied to the credit crunch.
India’s economic output and prices are “under pressure” due to the global financial crisis and higher international prices of energy, food and commodities, Reddy said. Growth in the $906 billion economy slowed for the first time since 2005 in the fiscal year ended 31 March, the government estimates.
India’s equity market has been volatile in recent months, reflecting overseas trends, Reddy added.