India not in crisis, won't seek funds from IMF in next 5 years: Raghuram Rajan

Reserve Bank of India (RBI) Governor Raghuram Rajan has sent out a clear message when he told a media channel that India is not facing any economic crisis and won't approach the International Monetary Fund (IMF) for funds in the next five years.

Allaying fears of India not being able to meet its financial obligations, Rajan said: "India's external debt to GDP is 22 per cent. Twenty-two 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.

"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," Rajan said at CNN's Debate on the Global Economy.

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.

"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," Rajan said, speaking on the sidelines of IMF's meeting in Washington.

India's economic growth fell to a decade low of 5 per cent in 2012-13 fiscal, while its current account deficit (CAD) 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.

The central bank has taken a series of measures in the past months to strengthen rupee and promote growth.

Rajan 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."

The RBI governor 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.

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

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

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.