Indian Central Bank chief Raghuram Rajan has said it was wrong to attribute the problems in global markets entirely to China, as there were a number of other concerns too.
He told British broadcaster BBC on Tuesday that China has “become very important to the global economy”, and every adverse development anywhere in the world would certainly impact the rest as well.
“It works through financial markets first, then trade later. So it’s something that everyone is concerned about. But you have to be careful about attributing everything to China. There are a number of concerns about when interest rates will normalise around the world – and there’s also questions about whether some markets are just too high,” he said.
A day after China’s central bank lowered interest rates in an attempt to ease the crisis, most Asia-Pacific stocks suffered minor losses on Wednesday. Investor confidence was also hit by a last-minute plunge on Wall Street on Tuesday.
Meanwhile, Reserve Bank of India governor Rajan has also said it will be “a long time” before India can replace China as a growth engine for the global economy, even if it grows at a faster rate.
“India is one-fourth to one-fifth of China’s size. Even if we can overtake China in terms of growth rates, the magnitude of the effect will be far smaller for a long time to come,” he said.
China still remains the fastest-growing G-20 nation, even though the Asian economy is no longer expanding at the pace it did a few years ago. China’s economy grew 7.3 per cent in the fourth quarter of 2014 from a year earlier, and is expected to slow to 7 per cent in 2015. To counter that slowdown, People’s Bank of China policy makers are boosting monetary stimulus.
The Indian economy grew 7.5 per cent year-on-year in the Jan-March quarter outstripping China’s 7 per cent growth in the same quarter.
The latest figures show India is growing faster than China, the result of a new method of calculating GDP.
The new method of calculating India’s GDP measures economic activity by market prices instead of factor costs, taking into account gross value addition in goods and services as well as indirect taxes.
Economists, including the Indian government’s Chief Economic Advisor Arvind Subramaniam and the Central Bank Chief Raghuram Rajan have warned against rushing in to use the new numbers to craft policy.