MUMBAI, Oct 29: Sustained reforms and economic resilience have put India on a path to graduate from an emerging to an emerged market status in the coming decades, possibly within the next few years, Reserve Bank Deputy Governor Poonam Gupta said on Wednesday.
Addressing the Business Standard BFSI Insight Summit here, Gupta said India’s policy frameworks have continued to evolve and are currently among the best globally.
Its exchange rate, which was regulated until 1991, is increasingly market-driven, she said, adding that its external account has been managed well.
“There are inherent strengths in its diversified balance of payments. On the current account, the merchandise trade deficit has been balanced by strong services exports and remittances receipts. Oil price is not a dampener as it used to be. All in all, the current account shows resilience and is eminently in a sustainable zone,” the deputy governor said.
India has largely adhered to the path of fiscal consolidation, barring periods of significant shocks such as the pandemic, she added.
Gupta said the flexible inflation targeting framework for monetary policy, introduced in 2016, was a major structural reform in India.
“Evidence points towards improved outcomes post adoption of flexible inflation targeting: inflation has become lower and less volatile; inflationary expectations are better anchored; and the transmission of monetary policy has become more effective,” she added.
As a result of the full matrix of policy reforms, Gutpa said India’s GDP and per capita income growth rates have accelerated over time; growth has been among the highest globally; and its variability has declined.
“India’s near-term growth outlook is promising too,” she said.
She also noted that emerging markets (EMs) have put in place policy frameworks and decision-making processes that have made them less vulnerable to macroeconomic and financial instability.
“India has been a frontrunner in implementing these reforms. As a result, while the intensity of external shocks may not have declined, the variability of the macroeconomic outcomes has moderated considerably,” she said.
This economic resilience has enabled the policy makers to focus on reforms to enhance productivity, facilitate ease of doing business, and improve the quality of financial intermediation, Gupta said.
“Such collective efforts are surely putting India on the path to graduate from an emerging to an emerged market status in the coming decades (and possibly even in the coming years),” the deputy governor said.
In her address, Gupta also said the increased incidence of protectionism has emerged as a new threat to global trade.
Apart from reducing the contribution of external demand to growth, these developments also reduce the impact of potential spillover benefits to domestic growth through channels such as technology transfer, she added.
Even as some of the trade relations will be rebuilt and others will evolve during the course of time, the years of hyper-globalisation are unlikely to return anytime soon, Gupta pointed out. (PTI)
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