RBI MPC member calls India's economic growth extremely fragile

RBI MPC member calls India's economic growth extremely fragile

Varma says that higher interest rates that make EMIs and borrowing expensive, have reduced the spending power of Indians.

FPJ Web DeskUpdated: Sunday, February 26, 2023, 12:38 PM IST
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The global economy is in turmoil with growth expected to slow down to 2.9 per cent, according to the International Monetary Fund which sees India doing relatively better. At the same time a report has suggested that India's growth has been held back at 4.9 per cent in the October-December quarter, with inflation rising again. But the Reserve Bank of India's monetary policy committee member has painted a grim picture, calling the country's growth extremely fragile.

Reality check after PM's claim?

Varma says that higher interest rates that make EMIs and borrowing expensive, have reduced the spending power of Indians, taking down demand with it. Even as the Economic Survey predicted a 6.5 per cent growth for India, Varma feels that rate hikes hamper the growth needed considering India's demographic and income level. As for global inflation, the IIM-A professor feels that the world is learning to live with the Ukraine war, and the issues caused by geopolitical tensions will solve themselves.

Interest rates hurting economy

Although the RBI has been raising repo rates to buckle inflation, Varma says that prices will go down during FY24. He had also opposed the recent 25 basis points hike by the central bank in a monetary policy committee meeting. Varma also added how exports are suffering and the private sector finds it difficult to get capital, while the government can't support businesses as it eyes fiscal consolidation.

The reality check from Jayanth Varma comes a week after the Prime Minister Modi claimed that India is now out of the list of fragile-five economies. PM Modi had also claimed that India has become an anti-fragile economy, which is resilient to headwinds and even creates opportunities in a crisis.

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