India insulated from rising US yields, focus must be on sustaining growth: Economists
New Delhi, Oct 3
India is relatively insulated from the impact of rising US bond yields due to the largely domestic ownership of its government securities, while the country's long-term economic challenge lies in sustaining growth through reforms amid global uncertainties, economists and experts said on Saturday.
Speaking to IANS, on the sidelines of the 5th Kautilya Economic Conclave here, former Reserve Bank of India Deputy Governor and economist Michael Debabrata Patra said the direct impact of higher US bond yields on India's debt market remains limited.
"Not really, because only 3 per cent of India's stock of government bonds is held by foreigners. It is mostly domestically held," Patra said when asked about the impact of rising US yields on emerging markets like India.
He noted that while a broader global trend of rising yields could influence investor sentiment, domestic factors remain the primary driver of Indian bond yields.
"There is a sympathetic factor that when bond yields are rising everywhere in the world, they tend to reflect that. But India-specific factors are driving Indian bond yields. It's not so much the US," he added.
On External Affairs Minister Dr S. Jaishankar's warning about a possible global food crisis stemming from fertiliser shortages and ongoing geopolitical conflicts, Patra said India is actively diversifying its sources of fertiliser imports.
"The war in Ukraine and in West Asia are creating supply bottlenecks, but I believe that while the shortages may be temporary, over the longer run, India will widely diversify its sources and import markets and manage the situation," he told IANS.
Meanwhile, economist and former NITI Aayog Vice Chairman Arvind Virmani favoured reducing product-specific subsidies and moving towards direct support mechanisms.
"Reducing subsidies is a good thing. Subsidies should be given directly. Subsidies are an inefficient way of providing support because they distort the market," Virmani told IANS.
He described the shift as part of a broader transition towards an unsubsidised economic framework.
On India's growth prospects, Virmani said the key challenge is maintaining growth momentum rather than continuously accelerating it.
"The history of growth tells you that you cannot keep raising it continuously. You undertake reforms, push growth to a higher level and then the challenge is sustaining that rate," he said, pointing to global disruptions such as the Ukraine war as examples of external challenges facing policymakers.
— IANS
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