y v reddy : some perspectives on the indian economy address by dr y v reddy, governor of the reserve bank of india, at the peterson institute for international economics, washington dc, 17 october 2007. * * * mr. chairman and friends, i am greatly honored by the invitation extended to me by the peterson institute for international economics to share some of my thoughts on the indian economy. this meeting is reflective of the recently observed growing interest and confidence in the status and future of the indian economy. today, i intend to submit that, since independence in 1947, the indian economy has been on the whole, on a path of gradually self - accelerating development accompanied by reasonable stability. there has been a noticeable acceleration in the level of confidence and the performance of the indian economy in the 21st century. the short - term prospects, despite recent global uncertainties, continue to be, by and large, benign for india. over the medium - term, there are several challenges and opportunities. the public policy may, therefore, have to specially focus on these aspects in order to meet not only the expectations of the global community, but also, and more importantly, the aspirations of millions of people in india, particularly the poor and the underprivileged from diverse backgrounds. i. self - accelerating growth since independence and in the new millennium before independence, during the first five decades of the 20th century ( 1900 - 01 to 1946 - 47 ), the annual average growth performance of the indian economy was dismal, averaging 0. 9 per cent. since the beginning of the planned development process in the early 1950s, the gdp growth displayed a self - accelerating tendency reaching a level of around 6. 0 per cent in the 1990s. two exceptions during this phase were the dipping of the growth rate in the 1970s to 2. 9 per cent and during the crisis year of 1991 - 92 1 when the growth was as low as 1. 4 per cent. the record of inflation in india has been satisfactory. since independence, the wholesale price inflation, on an average basis, was above 15 per cent in five out of fifty years. in thirty six years, out of fifty, inflation was in single digit and on most occasions high inflation was due to external and domestic shocks such as sharp rise in fuel and food prices. in the new millennium, the gdp growth rate has accelerated further averaging 6. 9 per cent during the seven - year period 2000 - 01 to 2006 - 07, while the growth rate in the last four

his business will still flourish. let me bring up some statistics to highlight the importance of the exportoriented sector in the mauritian economy and the extent to which they are exposed. the eoe sector plays a key role in our economy and its sustainability and competitiveness are a matter of national interest. to take 2010 figures, the eoe sector represents around 6 per cent of gdp, accounts for 58 per cent of total export of goods, and provides employment to nearly 56, 000 persons, which in turn represents a little over 10 per cent of total employment. however, the eoe sector and external demand - led sectors as a whole are subject to some structural weaknesses which make them particularly vulnerable to external shocks. a full two - thirds of our total export of goods was directed to european markets in 2010. this bis central bankers ’ speeches pattern of dependence on europe is also evident on the services front. two - thirds of our tourists also come from europe. to complete the picture, half of total fdi inflows into mauritius came from europe in 2010. this geographical concentration on europe for exports of goods and services, and inward investment, is not replicated on the import side. europe provided only one quarter of our imports of goods. we are not only highly exposed to the european market ; we also have to cope with the imbalance in the currency in which our trade is conducted. on the one hand, it is estimated that 41 per cent of our export proceeds is denominated in euros. the share of the us dollar and pound sterling stands at 39 per cent and 14 per cent, respectively. on the other hand, our imports are invoiced mainly in us dollars, with a share of 67 per cent. the euro represents 21 per cent and the pound sterling less than 2 per cent of imports. at one point in time, the combination of a downward slide of both the euro and the pound sterling on global currency markets, coupled with a stronger us dollar, raised serious concern in view of the negative implications of such a trifecta on a wide spectrum of economic activity in the country, including the sugar, textiles, tourism and bpo sectors. today, fortunately the rupee has stabilized. we cannot, however, pretend that we are protected from all external instability, as the value of our currency in the domestic foreign exchange market is largely driven by the interplay of domestic and international factors. after almost 84 weeks of non - intervention in the foreign exchange market, the