Indian economy has experienced a virtuous cycle of accelerated growth and macroeconomic stability, says RBI Deputy Governor
Indian economy is not just growing at an accelerated pace, it is also depicting enhanced macroeconomic stability which is reflected in a whole host of economic outcomes becoming steadier, Poonam Gupta, Deputy Governor, Reserve Bank of India, has noted. The economic outcomes now materialize within a narrower range, most notable of which are aggregate economic growth - overall as well as growth across sectors - and inflation, she opined in a speech titled Perspectives on India’s Growth: Last Four Decades to the Present. High, stable and accelerating growth, and more predictable economic outcomes have become the hallmarks of the Indian economy. The Indian economy, with its macroeconomic stability, policy consistency, a large and diversified demand base consisting of domestic consumption as well as exports, and a diversified production base is assured of a continuously improving economic trajectory. This is in contrast to a more modest economic promise of most other Emerging and Developing Economies, for they lack one or more of these enabling factors.
An economy is typically assessed to be macroeconomically stable if specific outcomes (commonly, inflation, current account deficit, fiscal deficit, quality of public debt and deficit, and those pertaining to the financial sector) are seen to be sustainable, growth supportive, and not indicative of excessive underlying risks or overheating. For India, most of these indicators have remained in a healthy range over the last four decades with notable improvement in recent years. Inflation has both moderated over time and has become more stable, especially under the flexible inflation targeting (FIT) regime. Average annual CPI inflation in India has declined from close to 10 per cent in the 1990s to about 6 per cent a year in the subsequent two decades; to below 5 per cent in the last four years; and is likely to remain benign in the coming months. Inflation has also declined relative to other countries. India’s inflation differential has narrowed vis-à-vis advanced economies (AEs) and other emerging market and developing economies (EMDEs).
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