Reserve Bank of India Governor Raghuram Rajan, on Monday, said government debt was not yet a problem for India even as Standard & Poor’s stated that high government debt was putting the sovereign rating under pressure.
“We are one of the few countries that do not have a huge debt problem as yet,” he said, addressing the students of Guru Nanak College here.
He said many European Union countries indulged in excess borrowing.
The RBI Governor said in the face of difficulties after the global financial crisis, central banks around the world are printing money and reducing interest rates to very low levels.
India was suffering ‘avalanche’ of capital flows because of this on one hand, and was unable to lower interest rates due to high inflation on the other, he said.
“A lot of that money is coming to us. We have got an avalanche of capital inflows. Our problem is: we also have high inflation, we cannot cut interest rates very quickly to the bone in order to tell those countries — don’t come here expecting high interest rates,” the RBI Governor said.
Dr. Rajan said high capital inflows had their own problems and warned that if a situation of currency depreciation were to arise, there could be problems for companies which had not hedged.
On the global growth, he said the U.S. seemed to be coming out of the period of slow growth but China was slipping into a slow growth.
“The U.S. looks like it is coming out of its period of slow growth but big areas in the world (like) Europe, Japan and now increasingly China seem to be going back into a period of very slow growth,” Dr. Rajan said.
He said the non-performing assets of banks were a problem and the RBI was trying to solve it.
The RBI was still trying to understand the new system of computing GDP, but a 7.4 per cent GDP expansion made India one of the fastest growing large economies in the world, he said.
