Washington, Jul 9: Obama Administration told the U S Congress on Thursday, Jul 8 that the global economic and financial crisis had a relatively muted effect on India for it's limited dependence on external demand and strong fiscal and monetary stimulus measures.
The report to the Congress on international economic and exchange rate policies, however, notes that the rate of growth of the Indian economy slowed down during the period of the global economic crisis, though it had bounced back.
"Economic growth slowed to 6.8 per cent in 2009, compared to an average rate of 9.4 per cent in 2005 to 2007. Real GDP expanded by 16.8 per cent on a seasonally adjusted annualized basis in the third quarter of 2009, before contracting in the fourth quarter by 2.8 per cent as the worst monsoon in nearly 25 years resulted in a steep decline in agricultural output," said the report.
In its latest annual Budget, the Treasury informed the Congress that the Indian government is aiming at a modest fiscal consolidation to reduce the central government fiscal deficit to 5.5 per cent of GDP from 6.9 per cent of the GDP in FY2009-10.
The report also said that India is expected to continue to pursue fiscal consolidation, due to its large general government deficit (about 11 per cent of the GDP in FY2008-09) and high public debt to GDP ratio (about 80 per cent, substantially higher than most emerging market economies).
"While the RBI seeks to achieve its monetary objectives of price stability and well-anchored inflation expectations by adjusting market liquidity through its policy rates and the cash reserve ratio, at times, it has used the exchange rate to help meet monetary objectives," stated the report.