India has sufficient foreign exchange reserves, external debts are low and the country is not facing economic
problems like Sri Lanka and Pakistan, former RBI governor Raghuram Rajan said.
“The RBI has done a good job in increasing the reserves. Our foreign debts are also less,” Rajan said.
According to Rajan, low foreign debt and high foreign exchange reserves make Indian economy resilient. Countries like Sri Lanka and Pakistan are facing deep financial troubles due to very low forex reserves and mounting external debts.
According to RBI data, India’s foreign exchange reserves stood at $571. 6 billion for the week ended July 22. At end-March 2022, India’s external debt stood at $620. 7 billion, according to RBI data. The external debt-to-GDP ratio declined to 19. 9% at end-March 2022 from 21. 2% at end-March 2021.
Usable 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 reserves dipped by $754 million to $8. 6 billion for the week ended July 22, according to Pakistan’s central bank.
On inflation, Rajan said the hike in policy rates by the RBI would help in reducing the inflationary pressure. The RBI is increasing interest rate, which will help in reducing inflation. Most inflation is in food and fuel. “As we can see food inflation is coming down in world and will decrease in India also,” he said.