Mumbai, Aug. 30: The Indian economy has acquired a remarkable degree of resilience and can cope with both domestic and external shocks with minimal adverse consequences for growth, inflation and financial stability, the Reserve Bank said in its annual report 2001-02.
“The Indian economy seems to have acquired a remarkable degree of resilience and is not only in a position to withstand supply shocks but also cope with both domestic and external shocks,” the apex bank said.
Explaining the basis of its confidence, the RBI stated that there are several significant achievements in terms of sustaining growth, containment of inflation and alleviation of poverty while providing resilience in the external sector.
Moreover, a foundation has been laid, particularly in financial and external sectors for acceleration of the growth rate, RBI averred.
Medium-term growth prospects for the Indian economy, however, would be contingent upon a number of factors including legislative changes, in particular, those relating to ownership, regulatory focus, development of financial markets and bankruptcy procedure.
The RBI also noted that persistent overshooting of market borrowings by the central and state governments has imposed constraints on the borrowing programme, putting pressure on yields.
“This in turn often predicates the subservience of monetary policy operations to the goals and objectives of debt management. Accordingly, even as the debate on separation of the two functions was intensifying, changes in legal framework were being envisaged to improve the functional autonomy of the RBI in its operations,” the apex bank observed.