Reserve Bank of India(RBI) governor Y V Reddy today said India and China were the only countries among the emerging market economies(EME) with an investment rate of more than 30% of their gross domestic product(GDP). However, China has a higher saving rate of over 40% as compared to India where it is in the range of 20-30%, he said.The Indian economy is driven by domestic demand whereas China is largely driven by external demands, while both economies enjoy the benefit of significant human capital. Facilitated by the presence of fixed exchange rate regime, significant progress has been made by emerging market economies as regards huge short-term external debt, inappropriate incentives in the capital account, tax, and supervisory regime, which were responsible for their vulnerability, Reddy said.But it is useful to know that reforms are far from over before they are fully integrated into the global economy and mature out of EME status," Reddy said.He said that under the present circumstances, many conditions are favourable for most of the EMEs including favourable terms of trade besides large foreign currency reserves with reduced external debt as the percentage of GDP.
