HYDERABAD (TIP): Brexit may have caused a lot of uncertainty in the global economy but the development has made India a `safe haven’ for investors in the past few days, Chief Economic Advisor (CEA) Arvind Subramanian said.
“There has not been much of a pullout from India at all, if you look at where the money has gone out from the stock market in India. Among all the major economies, India may be the third or fourth least affected. Similarly, our currency has been affected much less compared to other currencies. In some ways if we look at the data, India seem to be like a haven where money came in rather than left as the economy is relatively sound and growth prospects are good,” Subramanian said. He was delivering a talk at the C R Rao Advanced Institute of Mathematics, Statistics and Computer Science at the University of Hyderabad.
Citing the example of trading in government securities (G-secs), the former IMF economist said after the first two days of Brexit, the yield on G-Secs went down, which meant that more people were buying government bonds in India. Bond yields and prices are inversely related, thus when bond prices go up, yields fall. “Essentially if you look at what happened to yields in G-secs, normally you would think that when there is a crisis, people will go out of G-secs. But in fact, people not buying (government bonds) and that is in contradiction to several emerging countries like South Africa, where G-sec rates went up (because people sold these bonds),” he said.
Subramanian said the current account deficit is expected to be within 1 per cent of the GDP this fiscal due to low oil prices. On food inflation, he said high prices of pulses is a major concern as two successive years of drought has hit production in the country.