Not like ‘91: World Bank economist

Says India need not seek a credit line from the IMF, favours use of foreign exchange kitty to curb volatility

Prime Minister Manmohan Singh's assurance that the economy is not in a 1991 like situation has got the backing of World Bank's chief economist Kaushik Basu.

Basu, a one-time chief economic adviser to the government who is familiar with the Indian conditions, has dismissed this comparison as a non-question. He told reporters here, ''Are we back to 1991? That is completely a non-question, because if you just look at a couple of numbers, then you say there is absolutely no comparison. Foreign exchange reserves in 1991 were down to $3 billion, India now sits on $280 billion foreign exchange reserves."

On the basis of the same statistic, he also ruled out the need for India to approach the International Monetary Fund for any assistance in this situation. ''I don't think we are in a situation where there is any need for that. India has enough foreign exchange reserves. So, the question of having to turn to IMF is not there," he observed. Basu said that even though the current growth rate of 5 percent is low, in 1991 it was still lower. As the rupee slid after a slew of measures were announced by Finance Minister P Chidambaram, the prime minister had sought to assuage the feelings of the nation by observing that the situation is not comparable to 1991 and the economy would not remain in this state for long. The World Bank's chief economist also virtually approved the steps taken by the Reserve Bank of India to check the falling rupee. He said, ''Supporting the currency is a typical matter. Typically, what RBI has done is what central banks with floating exchange rates do." But Basu's support for the Prime Minister did not prevent the falling rupee or the dipping Sensex from maintaining their downward trend.