Home / Economy / Will India face economic problem like Sri Lanka, Pakistan? See Raghuram Rajan's reply

India's neighbour, both Pakistan and Sri Lanka are witnessing their worst economic crisis at present. It is India that has come forward and helped Sri Lanka in quick economic recovery. In fact, India has given unprecedented support of $3.8 billion this year to cash-starved Sri Lanka. Whereas Pakistan is planning to sell shares of government-owned entities to friendly countries with a buyback option.

In this scenario of economic problems, former Reserve Bank of India (RBI) Governor Raghuram Rajan's statement on India's economy has come as a sigh of relief. Rajan said that India has sufficient foreign exchange (forex) reserves, external debts are low and the country is not having the economic problems like Sri Lanka and Pakistan.

"We have sufficient foreign exchange reserves. RBI has done a good job in increasing the reserves. We are not having problems like Sri Lanka and Pakistan. Our foreign debts are also less," the former RBI Governor told ANI news agency.

According to the latest RBI data, India's foreign exchange (forex) reserves stood at $571.56 billion for the week ended July 22.

In end-March 2022, India's external debt stood at $620.7 billion. India's external debt to GDP ratio declined to 19.9% in end-March 2022 from 21.2% in end-March 2021.

Ex-RBI Governor Rajan said low foreign debt and high foreign exchange reserves make the Indian economy resilient.

Sri Lanka and Pakistan are facing deep financial troubles due to very low forex reserves and mounting external debts. Usable forex reserves of Sri Lanka recently dipped below $50 million forcing the country to suspend payments on foreign loans. The situation in Pakistan is equally bad. Pakistan's forex reserves dipped by $754 million to $8.57 billion for the week ended 22nd July 2022, as per Pakistan central bank's latest data.

On inflation, Rajan said the hike in policy rates by the RBI would help in reducing the inflationary pressure. He said high food inflation has been due to seasonal factors and is likely to come down.

India's retail inflation eased to 7.01% in June from 7.04% in the previous month helped by softening crude and edible oil prices, according to data released by the National Statistical Office (NSO) recently.

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