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India won't seek IMF funds in five years: Rajan

Last updated on: October 11, 2013 20:35 IST

India is not facing any economic crisis and won't approach IMF for funds in the next five years as the country has enough forex reserves, Reserve Bank Governor Raghuram Rajan has said.

"There's no way we are close to being a country in financial or economic crisis...There's not a chance we will go to the IMF for money in the next five years," he said at CNN's Debate on the Global Economy.

The Reserve Bank has taken a series of measures to strengthen rupee and promote growth.

Allaying fears of India not being able to meet its financial obligations, Rajan said: "India's external debt to GDP is 22 per cent. 22 per cent of GDP is external debt and India's has reserve of $280 billion which is 15 per cent of GDP."

In other words, the country can pay three-fourth of its debt from its forex reserves, he said.

"Out of total short-term external debt that we have to pay for is 10 per cent of GDP. So, we have enough reserve to take care of that," he said speaking on the sidelines of the fund's meeting here.

He said: "We bought over $60 billion dollar gold last year. $60 billion accounts for three-fourth of our current account deficit. If the push comes to shove, we can pay the world in gold."

He said while India's economy has slowed, the country's forex

reserves are large enough.

"We need to bring back growth now. But we're still doing better than a significant number of economies in the world," he said.

India's economic growth fell to a decade low of 5 per cent in 2012-13 fiscal, while its current account deficit soared to an-all time high of 4.8 per cent of GDP that year.

The Indian currency, which depreciated sharply after US Fed announcement of stimulus tapering in May, has pushed up cost of imports, mainly crude oil and contributing to inflation.

During the debate, Rajan also warned that "easy money" created by the US Fed's stimulus policies is large part of the problem.

"Easy money is part of our problem," India's top banker said.

Finance Minister P Chidambaram, who is also in Washington, has dismissed IMF's growth projection of 3.75 per cent for India as pessimistic.

He said the country's economy is expected to grow by 5 to 5.5 per cent in the current financial year on back of good monsoon, robust farm output and impact of reform measures undertaken by the government in past one year.

Both Chidambaram and Rajan are here to participate in the Fund-Bank meetings.

Other participants in the debate included Christine Lagarde, Managing Director of IMF, Gang Yi, Deputy Governor of People's Bank of China, Luis de Guindos and Minister of Economy and Competitiveness of Spain.

Aditi Khanna in London
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